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From Hubris to Nemesis: Irish Banks, Behavioral Biases, and the Crisis

Dr Michael Dowling: DCU Business School, Dublin City University, Dublin 9, Ireland. Email:

Professor Brian M. Lucey: School of Business Studies and Institute for International Integration Studies (IIIS), Trinity College Dublin, Dublin 2, Ireland. Glasgow Business School, Glasgow Caledonian University, Glasgow, G4 0BA, United Kingdom. Faculty of Economics, University of Ljubljana Kardeljeva, Ploscad 17 Ljubljana, 1000, Slovenia. Email:

IIIS Discussion Paper No. 435

The collapse of the Irish economy, still ongoing after five years, has its roots firmly in the banking sector. Lax risk management, aided by poor board oversight and behavioral biases among senior executives, is now viewed as one of the primary causes of the over-lending during the 'Celtic Tiger' years which fueled the excessive growth in credit and subsequent banking implosion, eventually resulting in all Irish banks ending in state ownership. We approach the causes of the Irish banking sector collapse from a behavioural perspective of the role of Boards of Directors in bank risk management, and then proceed to explore the likely presence of behavioral 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.


Last updated 28 August 2014 by IIIS (Email).