Directors’ and Officers’ Liability Insurance and Corporate Idiosyncratic Risk

DOI

10.2991/assehr.k.211209.194How to use a DOI?

Keywords

directors’ and officers’ insurance; corporate idiosyncratic risk; corporate governance

Abstract

We examine the effect of directors’ and officers’ insurance (D&O insurance) on corporate idiosyncratic risk in the Chinese market. We find that D&O insurance in China is negatively associated with corporate idiosyncratic risk. This association is robust to a series of robustness checks, including propensity score matching procedure and the inclusion of some possibly omitted variables. Further analyses show that only the idiosyncratic risk of the state-owned enterprises (SOE) can be significantly affected by the purchase of D&O insurance. Moreover, we find that the impact of D&O insurance on idiosyncratic risk is more pronounced in firms with Big 4 auditors, higher analyst coverage, and higher growth rate. Our findings support the notion that D&O insurance appears to improve corporate governance and provide a new understanding of the effectiveness of D&O insurance in emerging economies.

Copyright

© 2021 The Authors. Published by Atlantis Press International B.V.

Open Access

This is an open access article under the CC BY-NC license.

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TY  - CONF
AU  - Shan Huang
AU  - Muhan Shi
AU  - Chengyi Shi
AU  - Zecheng Xu
AU  - Haoran Xu
PY  - 2021
DA  - 2021/12/15
TI  - Directors’ and Officers’ Liability Insurance and Corporate Idiosyncratic Risk
BT  - Proceedings of the 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021)
PB  - Atlantis Press
SP  - 1204
EP  - 1212
SN  - 2352-5428
UR  - https://doi.org/10.2991/assehr.k.211209.194
DO  - 10.2991/assehr.k.211209.194
ID  - Huang2021
ER  -