We analyze the direct impacts of managerial overconfidence upon the dividend decision and demonstrate that the dividend levels and speeds of adjustment to target levels can increase when managers exhibit overconfidence. However, we demonstrate that the directional impact upon dividend levels will depend upon the nature of the managerial overconfidence. We consider two components of managerial overconfidence, pride and egotism, and show that differing degrees of investor bias can lead to reversals of this situation with the result that the empirical results will be influenced by the relative impacts of manager and investor related cognitive biases.