Economics at your fingertips  

Effects of directors and officers liability insurance on accounting restatements

Tzu-Ching Weng, Guang-Zheng Chen and Hsin-Yi Chi

International Review of Economics & Finance, 2017, vol. 49, issue C, 437-452

Abstract: This study investigates the relationship between directors and officers liability insurance (D&O insurance) coverage and the probability of accounting restatements. The results show that when managers are covered by relatively higher levels of D&O insurance, they are more likely to restate their financial reports. Moreover, the findings indicate that D&O insurance coverage is related to core earnings restatements and income overstatements, suggesting that managers’ accounting policies are more aggressive when they have fewer legal liability concerns. Overall, these results provide consistent evidence that reducing managerial legal liability has the effect of encouraging managers to misstate reported earnings.

Keywords: Directors and officers liability insurance; Legal liability; Earnings restatements (search for similar items in EconPapers)
JEL-codes: G22 M41 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Series data maintained by Dana Niculescu ().

Page updated 2017-09-29
Handle: RePEc:eee:reveco:v:49:y:2017:i:c:p:437-452