The impact of directors’ liability insurance on board meeting attendance

Abstract

We study the relationship between directors’ liability insurance and board meeting attendance. We find that directors’ liability insurance and board meeting attendance are positively associated. This suggests that directors’ liability insurance may actually serve a governance role because an insurer definitely has incentives to thoroughly scrutinize the insured. As a result, director’s board meeting attendance rate increases because more monitoring of directors leads to more responsible behaviors of directors. With 98,524 yearly observations at the director level and 8,968 yearly observations at the firm level of listed firms in Taiwan during the period from 2008 to 2015, our empirical findings suggest that, on average, the board meeting attendance rate of insured firms is 2.9 percent higher than that of uninsured firms.