 Controlling-minority shareholder incentive conflicts and directors' and officers' liability insurance: Evidence from ChinaHong Zou, Sonia Wong, Clement Shum, Jun Xiong and Jun Yan Journal of Banking & Finance, 2008, vol. 32, issue 12, 2636-2645 Abstract: This paper examines the demand for directors' and officers' liability insurance (D&O insurance) by Chinese listed companies where controlling-minority shareholder incentive conflicts are acute due to the concentrated and split ownership structure. We hypothesize and find evidence that the incidence of seeking D&O insurance is positively related to the extent of controlling-minority shareholder incentive conflicts - a finding not previously documented in the literature. Using an event study, we find that the announcements of D&O insurance decisions in firms that engage in earnings management, and/or are controlled by a local government (such firms tend to have stronger incentives to tunnel), seem to have a negative wealth effect. In addition, the incidence of the D&O insurance decision is positively related to the proportion of independent directors and several litigation risk proxies. Therefore, the breakthrough in corporate governance and judicial reforms has created non-negligible perceived securities litigation risks in China. Keywords: D&O; insurance; Private; securities; litigation; Expropriation; Tunneling; China (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:32:y:2008:i:12:p:2636-2645 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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