Dose Managerial Optimism Affect Bank Risk-Taking? An Empirical Analysis Based on A-Share Listed Banks in China

Abstract

In order to study the impact of management optimism on commercial banks’ risk-taking, this paper uses the unbalanced panel data of 28 A-share listed banks in China to analysis. The empirical results of the OLS estimation show that the excessive optimism of management has a significant positive impact on the risk-taking of commercial banks. The bank’s risk-taking level is also positively related to its deposit-loan ration and cost-income ratio, and has negative correlation with core capital adequacy and asserting scale. Therefore, when formulating policies, the supervisory authority should take into account the possible impact of managerial optimism on bank risk-taking. Commercial banks themselves should also pay attention to the excessive optimism of management in the design of compensation incentive system.