Corporate social responsibility, CEO overconfidence and bank performance

Purpose This paper is conducted to investigate the CEO overconfidence impact on the corporate social responsibility (CSR) and bank performance binding connection, examined through a sample involving 115 American and European banks, over the time span ranging from 2013 to 2022. Design/methodology/approach In this study, we used the method of generalized least squares realizable (FGLS) to estimate the effect of CEO overconfidence on the relationship between corporate social responsibility (CSR) and bank performance. Findings Firstly, on investigating the CSR effect on banking performance, the results revealed that CSR turned out to be negatively linked with financial performance (FP) by contributing to depleting banks’ financial resources. Secondly, on analyzing the CEO overconfidence effect on CSR, the findings appeared to indicate that overconfidence proved to demonstrate a positive effect on bank performance level, whereby executives would overvalue their personal contribution to the banks’ overall performance. We subsequently proceeded with assessing the CEO overconfidence effect on CSR, which demonstrated a negative influence on performance. Such a finding highlights well that overconfidence biased managers to tend to engage more intensely in CSR practices for the sake of maintaining an improved image in respect of stakeholders. In a last step, we undertook to assess the overconfidence bias effect on the relationship between banking CSR and FP performance. We ended up concluding that CEO overconfidence proved to contribute to positively moderating the CSR and bank FP binding association. Originality/value The present study provides stakeholders, particularly, regulators, investors, and customers, with practical insights as to the factors likely to affect the banking sector’s associated CSR practices and performance. It is also useful for decision-makers to take appropriate measures while accounting for the potential impacts of CEO overconfidence on both of the adopted CSR practices and achieved FP.