The Impact of Directors’ and Officers’ Liability Insurance on Corporate Performance: An Empirical Evidence from the Data of Chinese Listed Financial Enterprises

Zhe Sun

doi:10.14738/assrj.71.7427

Abstract

Based on data of the listed banks and insurance companies from 2011-2016, this paper studies the factors affecting directors’ and officers’ liability insurance, the relationship between directors’ and officers’ liability insurance and corporate performance. Empirical research shows that there is a significant positive correlation between the company’s asset-liability ratio, corporate performance and directors’ and officers’ liability insurance. Directors’ and officers’ liability insurance has a significant positive effect on corporate performance of listed banks and insurance companies. The empirical findings of this paper will help to strengthen the understanding of directors’ and officers’ liability insurance in bank and insurance companies and promote the widespread use of directors’ and officers’ liability insurance in the future.

Highlights

In recent years, there have been a number of events in the market that caused significant losses to the company due to the negligence of directors and senior executives, leading to the increasing number of such civil lawsuits
The directors' and senior managers' liability insurance is an important type of professional liability insurance in developed countries, which provides protection for the third party's economic losses caused by the directors' and senior managers' negligence or negligence in the exercise of their duties
Different from the previous scholars' relevant research: Firstly, this paper takes the financial insurance industry as the research object and empirically tests the influencing factors of the demand for directors' and senior managers' liability insurance; Secondly, this paper empirically studies the impact of directors' and senior managers' liability insurance of listed banks and insurance companies on the company's business performance through OLS regression analysis and panel data random effect regression analysis, respectively

Summary

INTRODUCTION

There have been a number of events in the market that caused significant losses to the company due to the negligence of directors and senior executives, leading to the increasing number of such civil lawsuits. Jia Ning and Liang Chuchu (2013) started from earnings management behavior, and took China A-share listed companies from 2002 to 2011 as samples to empirically study the relationship between directors' liability insurance and corporate governance. Zhao Yang and John Hu (2014) took the listed companies in Shanghai and Shenzhen stock markets from 2002 to 2013 as a sample to study the relationship between the purchase demand of directors' executive liability insurance and the value of listed companies. Hu Guoliu and Hu Jun (2014) took A-share listed companies in China from 2007 to 2012 as a sample to study the impact of the introduction of directors' liability insurance on the performance of listed companies. This paper proposes the following assumptions: Hypothesis 2: The company's purchase of directors' and senior management's liability insurance is conducive to the improvement of the company's business performance. The average return on capital (ROE) is 18.28, which shows that listed banks and insurance companies have strong profitability and good business performance

DA mean value

Company nature Asset liability ratio

Company growth

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