The Effect of Managerial Overconfidence on Banking Systemic Risk

摘要

Our researcSh aims to examine the relationship between managerial overconfidence and its implication to the banking systemic risk. From behavioral finance perspective, overconfidence managers are more likely to overestimate the future return of the investment project or undertake risky project thus increase their contribution of systemic risk. In this research we use conditional value at risk (CoVaR) approach to measure systemic and to measure managerial overconfidence we use investment based proxy derived from the deviation of expected investment. Using data of Indonesian banks from 2004 - 2014, we found that bank with managerial overconfidence have statistically significant positive influence to the systemic risk compared to non-overconfidence managerial banks.