This study sought to establish the effect of CEO overconfidence on dividend policy of commercial banks in Kenya. The study used descriptive research design. The study used primary and secondary data. Regression and correlation analysis were used to establish the effect of CEO overconfidence bias on dividend policy. The study found out that; size had a positive effect on dividend policy which was statistically significant while liquidity had a negative effect on dividend policy and was not statistically significant. The coefficient of determination for the regression was found to be 31%. This indicated that, the independent variable explained only 31% of the variation in the dependent variable. The study concluded that, CEO overconfidence bias is a costly affair for commercial banks since it has a negative effect on dividend policy. It also concluded that, size had a positive effect on dividend policy while liquidity had a negative effect. This study recommends that, banks should monitor on the rate of CEOs overconfidence because overconfidence bias appears to affect the dividend policy negatively. Further, future research could be carried on the effects of CEO overconfidence bias on the dividend policy on financial institutions or may assess the effect of behavioral bias on dividend policy of commercial banks.