D&O insurance, technology independent directors, and R&D investment

Abstract

This study examines the effect of technology independent directors on firm R&D investment and investigated the influence and mechanism of directors' and officers' liability insurance11We will use “D&O insurance” for “directors' and officers' liability insurance” throughout the article. on the above effect. We find that technology independent directors positively affect R&D investment, and purchasing D&O insurance can significantly enhance this effect by improving the diligence of technology independent directors. The moderating effect of D&O insurance is more pronounced for private firms and younger technology independent directors. These results suggest that D&O insurance positively motivates independent directors to serve their fiduciary duties and provides new empirical evidence on the governance effects of D&O insurance in emerging markets and independent director groups.