Does Better Governance Lead to Fewer Punishments: Evidence from Property-Liability Insurers in China

Erin P. Lu

Chinese Economy, 2016, vol. 49, issue 1, 3-13

Abstract: This article uses a sample of property-liability insurers in China to investigate whether the so-called better governance, characterized by independent directors on the board and the separation of chief executive officer (CEO) and chairman of the board (COB), leads to fewer punishments (for insurer misbehavior) from the insurance regulators. We find weak evidence that independent directors help curb insurer misbehavior and counterbalance CEO influence. The separation of CEO and COB also helps reduce the number of punishments. In general, our findings support the regulators’ suggestions on inclusion of more independent directors and separation of CEO and COB.

Date: 2016
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DOI: 10.1080/10971475.2016.1114402

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