Abstract
D&O insurance is considered an important risk management tool in protecting the interest of minor directors and investors of listed companies. Over the past years, D&O insurance has been studied various times. Two major hypotheses about its actual effect on company values are the encouragement hypothesis and opportunism hypothesis. Our study was based on the revision of the Chinese Security Law in 2019, and through the empirical analysis, we confirmed that the effect of D&O insurance on company values is positive. Further study revealed that this effect on high-risk level corporate is more significant. These findings provided empirical evidence on the importance of D&O insurance in Chinese stock market, and showed the need for further studying and popularization.
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