The Norwegian banking crisis: Managerial escalation of decline and crisis

Abstract

This paper examines the impact and nature of managerial contribution to the Norwegian banking crisis. Numerous findings are reviewed which suggest that many bank managers produced inappropriate responses to the initial decline and subsequent crisis, and thus contributed to the crisis, due to a set of common managerial misrepresentations of the situation. These include: external attribution of failure, overoptimism and overconfidence, the confirmation trap, the illusion of control, irrational escalation of commitment and insufficient adjustment.