Can digital transformation in banking restrain managerial overconfidence?— Evidence from listed companies

This study examines the impact of digital transformation in banking on managerial overconfidence and its underlying mechanisms, based on empirical analysis of data from listed companies between 2010 and 2021. The findings reveal that digital transformation in banking manifestly suppresses managerial overconfidence in borrowing companies. The boosted information gathering capabilities and strengthened supervision by banks, coupled with improved debt governance effects, contribute to curbing managerial overconfidence. Furthermore, the inhibitory effect of digital transformation on managerial overconfidence is more pronounced in highly digitized companies and private companies. The theoretical analysis in this study sheds light on the mechanisms through which digital transformation in banking influences managerial overconfidence and provides policy implications for mitigating the negative consequences of excessive managerial confidence by promoting digital transformation.