From hubris to nemesis: Irish banks, behavioural biases and the crisis
Abstract
The collapse of the Irish economy, still ongoing after 5 years, has its roots firmly in the banking sector. Lax risk management, aided by poor board oversight and behavioural biases among senior executives, is now viewed as one of the primary causes of the over-lending during the ‘Celtic Tiger’ years that fuelled the excessive growth in credit and subsequent banking implosion, eventually resulting in all Irish banks ending in state ownership. The causes of the Irish banking sector collapse are approached from a behavioural perspective of the role of Boards of Directors in bank risk management and then proceed to explore the likely presence of behavioural biases among senior executives in Irish banks. The Irish context provides a pertinent case study of what can happen when hubris and associated behavioural biases take control of a bank's risk management strategy.
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Author's Biography
Michael Dowling is lecturer in finance in Dublin City University, Ireland. He completed his PhD and post-doctoral studies on the influence of emotions in investor decision making in Trinity College Dublin, Ireland. Michael’s research covers emotion, heuristic, gender and cultural influences on financial decision making, and has been published in journals including Journal of Economic Surveys, International Review of Financial Analysis and Journal of Multinational Financial Management.
Brian M. Lucey is professor of finance in Trinity College Dublin, Ireland. He obtained his PhD from the University of Stirling on the topic of behavioural asset pricing. His research output of more than 80 peer-reviewed publications covers behavioural finance, economic integration, and international finance. Brian is currently editor of International Review of Financial Analysis, Journal of Behavioral and Experimental Finance and founder of the INFINITI finance conference.
Citation
Dowling, Michael and Lucey, Brian M. (2014, March 1). From hubris to nemesis: Irish banks, behavioural biases and the crisis. In the Journal of Risk Management in Financial Institutions, Volume 7, Issue 2. https://doi.org/10.69554/NOXA2233.
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