 Directors’ and officers’ liability insurance: Evidence from independent directors’ votingTianshi Li, Tina Yang and Jigao Zhu Journal of Banking & Finance, 2022, vol. 138, issue C Abstract: Directors’ and officers’ liability insurance (D&O insurance) is one of the most controversial and least understood governance tools. Using manually collected voting data for all director types at Chinese listed firms, we provide the first evidence for the impact of D&O insurance on directors’ voting decisions and the subsequent effects on corporate governance and financial performance. We find that independent directors at firms carrying D&O insurance are more likely to dissent when benchmarked against their peers in the same firm on the same proposal. Our results are robust to endogeneity checks. We identify channels through which the incentive effects of D&O insurance operate. We also find that the positive effect of D&O insurance on independent director dissension is associated with better firm performance and monitoring outcomes, including less litigation and lower claim values, less underinvestment, better internal control quality, and improved CEO pay- and turnover-performance sensitivities. Keywords: Corporate governance; Directors’ and officers’ liability insurance; Independent directors; Voting (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:jbfina:v:138:y:2022:i:c:s0378426622000255 DOI: 10.1016/j.jbankfin.2022.106425 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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