 The Demand for Directors' and Officers' Insurance by Large UK CompaniesNoel O'Sullivan European Management Journal, 2002, vol. 20, issue 5, 574-583 Abstract: This paper investigates why large public companies in the UK purchase liability insurance for their directors and officers (D&O). Previous research suggests that companies may purchase D&O insurance for three reasons: (1) as part of their corporate insurance programme, (2) due to demand from directors, and (3) as part of an optimal governance arrangement. This study tests each of these hypotheses on a sample of large UK companies. The empirical analysis is facilitated by UK legislation obliging companies to disclose the existence of a corporate-funded D&O policy. The empirical analysis finds that insured companies are larger, are more exposed to US litigation, experience greater share price risk, exhibit lower levels of managerial ownership, and possess greater non-executive representation on their boards than uninsured companies. These findings provide some support for all three motivations for possessing D&O insurance but the demands of individual directors and governance seem particularly important. Keywords: D&O; insurance; Liability; Corporate; governance; Non-executive; directors (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eurman:v:20:y:2002:i:5:p:574-583 Ordering information: This journal article can be ordered from Access Statistics for this article European Management Journal is currently edited by Michael Haenlein More articles in European Management Journal from Elsevier |
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