Abstract
We examine the association between directors’ liability insurance and investment-cash flow sensitivity with listed firms in Taiwan. We find that directors’ liability insurance increases the investment-cash flow sensitivity. Specifically, insured firms are more likely to have excessive investment than uninsured firms given the same level of cash flow. This is the result of managerial opportunistic behaviors fueled by moral hazard inherent in directors’ liability insurance. Although managerial opportunism could certainly increase the likelihood of corporate wrongdoing, our results show that it could be mitigated by having improved regulation or corporate governance.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
