Directors' and officers’ liability insurance and the pricing of seasoned equity offerings

Tsai-Ling Liao, Hwei-Lin Chuang and Jo-Yu Wang

International Review of Economics & Finance, 2022, vol. 80, issue C, 12-26

Abstract: This study examines how financial markets price the information regarding the purchase of directors' and officers’ (D&O) insurance within the context of seasoned equity offerings (SEOs). We find that SEO firms carrying D&O insurance policies or higher insurance coverage experience less negative announcement effects. Further analyses show that the positive association between D&O insurance and SEO announcement effects is more pronounced for firms with higher director ownership but face weaker monitoring from product market competition. The evidence supports that the purchase of D&O insurance can serve as a form of monitoring D&Os, especially when external governance is weak.

Keywords: Directors' and officers' liability insurance; Seasoned equity offerings; Announcement effects (search for similar items in EconPapers)
JEL-codes: G14 G22 G32 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:80:y:2022:i:c:p:12-26

DOI: 10.1016/j.iref.2022.02.005

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