Abstract
We find that firms with overconfident CEOs maintain less credit lines than those with non-overconfident CEOs. This negative impact does not seem to be driven by changes in the supply of credit as tightening (or loosening) of bank lending standards does not influence over-confident CEOs’ holdings of credit lines. Moreover, we find that overconfident CEOs in firms with high public debt or high acquisition activity rely less on credit lines suggesting that they prefer to avoid bank monitoring involved in credit lines. Overall, we provide novel evidence on the importance of managerial biases in firms’ liquidity choices.