Research On The Effect Of Directors’ And Officers’ Liability Insurance On The Behavior Of Corporate Stakeholders

The important goal of corporate governance behavior research is to open up the "black box" of corporate governance operation by exploring individual cognition and individual behavior.Stakeholders play an important role in the field of corporate governance,but the relevant research is insufficient and there are many problems to be solved.For example,how do stakeholders view and deal with the problems about corporate governance?Can Stakeholder Participation in Corporate Governance Enhance Corporate Value?Since the introduction of D&O liability insurance into listed companies,there has been a controversy over its effect of "corporate governance effect" and "moral hazard effect".That is to say,D&O liability insurance can improve corporate governance efficiency by exerting supervision effect? Or will it strengthen the opportunistic behavior of executives and cause moral hazard? The existing literature has not reached a consistent conclusion.In addition,due to the problem of data acquisition,the research on D&O liability insurance is relatively few,and mainly focuses on normative research.How do stakeholders think of D&O liability insurance and what kind of behavior they will react to need further exploration and verification.The solution of these problems is conducive to improving corporate governance efficiency,improving corporate value and protecting stakeholders.Therefore,this paper argues that the research on the impact of D&O liability insurance on stakeholder behavior is an important research topic,and there has large research space.From the perspective of the interests of the contracting parties of D&O liability insurance,this paper divides stakeholder behavior into the main interest behavior of D&O liability insurance and the third-party interest behavior of D&O liability insurance.Among them,the main interest behavior of D&O liability insurance refers to the entrusted financial management behavior of enterprises,and the third-party interest behavior of D&O liability insurance refers to the restrictive loan behavior of bank and shareholder activism behavior.In order to study the impact of D&O liability insurance on stakeholder behavior,this paper first analyses and tests whether D&O liability insurance affects stakeholder behavior.Then,from the perspective of D&O liability insurance contract content,this paper analyses and verifies the mechanism of D&O liability insurance’s influence on stakeholders’ behavior.Then it analyses and tests whether the difference of D&O liability insurance contract environment will make the relationship between D&O liability insurance and stakeholder behavior different.Finally,from the perspective of corporate governance effect and test the economic consequences of D&O liability insurance on stakeholder behavior influences.The main contents and findings of this paper are as follows.Firstly,The paper analyses and tests the driving effect of directors’ and officers’ liability insurance on entrusted financial behavior.Based on the data of entrusted financing,this paper studies the effect of directors’ and officers’ liability insurance on the tendency of entrusted financial behavior,the structure of entrusted financial behavior and the moderating effect of financial relevance degree.In further analysis,the part of mechanism analysis and test,the paper analyses and tests the mechanism based on D&O liability insurance coverage clause,the D&O liability insurance notification terms,and the D&O liability insurance exclusion clause;The part of moderating effect analysis and test,this paper analyzes and tests the differential impact of D&O liability insurance contract environment on the relationship between D&O liability insurance and corporate entrusted financial behavior from the perspectives of institutional environment,financial environment and information environment;The part of consequences effect analysis and test,the paper analyses and tests the economic consequences of D&O liability insurance on entrusted financial behavior from the perspective of corporate governance.By empirically examining the impact of D&O liability insurance on entrusted financial behavior,we draw the following conclusions.Companies purchasing D&O liability insurance are more inclined to adopt entrusted financial behavior and allocate high-risk financial products.The positive correlation between D&O liability insurance and entrusted financial behavior is more significant in the higher financial correlation samples.By studying the impact of D&O liabilityinsurance contract content on entrusted financial behavior,this paper finds that the coverage of D&O liability insurance makes enterprises more inclined to adopt entrusted financial behavior by strengthening its incentive effect,and prefers to allocate high-risk financial products.The notification terms of D&O liability insurance strengthens its supervisory effect,curbs the private interest motivation of executives,reduces the tendency of enterprises to adopt entrusted financial management,but the propensity of allocating high-risk financial products tends to decrease.Although the exclusion terms of D&O liability insurance weakens its supervisory effect and incentive effect at the same time,the incentive effect is still greater than the supervisory effect,which makes enterprises more inclined to adopt entrusted financial behavior,but the propensity of allocating high-risk financial products tends to decrease.By studying the impact of D&O liability insurance contract environment on entrusted financial behavior,this paper finds that in state-owned enterprises,the incentive effect of D&O liability insurance is stronger,the tendency of enterprises to adopt entrusted financial management is higher,and they prefer to allocate high-risk financial products.Under the high-quality financial environment,the purchase of D&O liability insurance makes the company have higher expectation value and price for entrusted financial management,and has a higher tendency to adopt entrusted financial management,preferring to allocate allocate high-risk financial products.Under the high quality information environment,the supervisory effect of D&O liability insurance is stronger,which restrains the private interest motivation of executives.The tendency of enterprises to adopt entrusted financial management behavior decreases,and the propensity of allocating high-risk financial products tends to decrease.By studying the economic consequences of D&O liability insurance on entrusted financial behavior,this paper finds that entrusted financial behavior will improve company performance,while the behavior of allocating high-risk financial products will damage company performance in companies that purchase D&O liability insurance.Therefore,we believe that D&O liability insurance exerts corporate governance effect by influencing entrusted financial behavior,contrarily,it can exerts moral hazard effect by influencing the behavior of allocating high-risk financial products.Secondly,The paper analyses and tests the effect of directors’ and officers’ liability insurance on restrictive loan behavior of bank.Based on the data of guaranteed settlement loan,loan cost and term of loan,the paper studies the effects of directors’ and officers’ liability insurance on restrictive loan behavior of bank and the moderating effects of related guarantee and analyst concern.In further analysis,the part of mechanism analysis and test,the paper analyses and tests the mechanism based on D&O liability insurance coverage clause,the D&O liability insurance notification terms,and the D&O liability insurance exclusion clause;The part of moderating effect analysis and test,this paper analyzes and tests the differential impact of D&O liability insurance contract environment on the relationship between D&O liability insurance and restrictive loan behavior of bank from the perspectives of institutional environment,financial environment and information environment;The part of consequences effect analysis and test,the paper analyses and tests the economic consequences of D&O liability insurance on restrictive loan behavior of bank from the perspective of corporate governance.By empirically examining the impact of D&O liability insurance on restrictive loan behavior of bank,we draw the following conclusions.Banks will decrease lending restrictions for listed companies that buy D&O liability insurance.When the degree of affiliated guarantee is high,the incentive effect of D&O liability insurance is stronger,the risk perception of banks is higher,and the banks may tighten the loan restrictions on listed companies.When the degree of analyst concern is high,D&O liability insurance more likely to play corporate governance effect,which will reduce the risk perception and prudence of banks,then banks will relax lending restrictions on listed companies.By studying the impact of D&O liability insurance contract content on restrictive loan behavior of bank,this paper finds that the coverage of D&O liability insurance makes the incentive effect greater than the supervisory effect.The risk perception of banks is enhanced,and banks may tighten the loan restrictions on listed companies.The notification terms of D&O liability insurance will make the supervisory effect of D&O liability insurance greater than the incentive effect.In addition,the guarantee effect of insurance institutions will reduce the risk perception of banks,and banks may relax the restrictions on corporate loans.Although the exclusion terms of D&O liability insurance weakens its supervisory effect and incentive effect at the same time,the incentive effect is still greater than the supervisory effect,which makesthe bank’s risk perception relatively high,and then the bank will increases the loan restrictions on listed companies.By studying the impact of D&O liability insurance contract environment on restrictive loan behavior of bank,this paper finds that in private enterprises,the lack of implicit guarantee by the government makes the incentive effect of D&O liability insurance more harmful to banks,and the risk perception of banks is relatively high,thus banks will increase the restrictions on loans of listed companies.In the poor financial environment,the supervisory effect of D&O liability insurance is relatively small,which makes banks have a relatively high risk perception,and banks will increase the restrictions on loans to listed companies.Under the environment of high quality information,the supervisory effect of D&O liability insurance is relatively large,the risk perception of banks is reduced,and banks may relax the restrictions on corporate loans.By studying the economic consequences of D&O liability insurance on restrictive loan behavior of bank,this paper finds that among the listed companies that have purchased D&O liability insurance,bank restrictive lending behavior helps to improve the performance of listed companies,which indicates that the purchase of D&O liability insurance can increase the supervision of banks on listed companies,and then enhance the value of companies.That is to say,D&O liability insurance exerts corporate governance effect by influencing restrictive loan behavior of bank.Thirdly,The paper analyses and tests the driving effect of directors’ and officers’ liability insurance on shareholders’ activism behavior.Based on the perspective of trust and concern,the paper studies the impact of directors’ and officers’ liability insurance on shareholders’ voting behavior,shareholders’ communication behavior and the moderating effect of management Power and network centrality of independent directors.In further analysis,the part of mechanism analysis and test,the paper analyses and tests the mechanism based on D&O liability insurance coverage clause,the D&O liability insurance notification terms,and the D&O liability insurance exclusion clause;The part of moderating effect analysis and test,this paper analyzes and tests the differential impact of D&O liability insurance contract environment on the relationship between D&O liability insurance and shareholders’ activism from the perspectives of institutional environment,financial environment and information environment;The part ofconsequences effect analysis and test,the paper analyses and tests the economic consequences of D&O liability insurance on shareholders’ activism from the perspective of corporate governance.By empirically examining the impact of D&O liability insurance on shareholders’ activism behavior,we draw the following conclusions.The purchase of D&O liability insurance will reduce shareholders’ trust and enhance shareholders’ attention.Shareholders are more inclined to adopt positive voting behavior and positive communication behavior.The higher the power of management,the more likely D&O liability insurance will exert moral hazard effect,which will damage the interests of shareholders and make shareholders more inclined to adopt positive voting and communication behavior.The higher the degree of network centrality of independent directors,the more likely D&O liability insurance will exert corporate governance effect,and the less likely shareholders will adopt positive voting behavior and positive communication behavior.By studying the impact of D&O liability insurance contract content on shareholder’s activism,this paper finds that the coverage rate of D&O liability insurance will make the incentive effect of D&O liability insurance greater than the supervisory effect by strengthening its incentive effect.Shareholders’ trust will be reduced,shareholders’ attention will be enhanced,and shareholders will be more inclined to adopt positive voting behavior and positive communication behavior.By strengthening its supervisory effect,the disclosure obligation of D&O liability insurance will make the supervisory effect of D&O liability insurance greater than the incentive effect,enhance shareholders’ trust,reduce shareholders’ attention,and reduce shareholders’ inclination to adopt positive voting behavior and positive communication behavior.Although the D&O liability insurance excluding liability weakens its supervisory effect and incentive effect at the same time,the incentive effect is still greater than the supervisory effect at this time.The trust degree of shareholders decreases,the attention of shareholders increases,and shareholders are more inclined to adopt positive voting behavior and positive communication behavior.By studying the impact of D&O liability insurance contract environment on shareholder activism,this paper finds that in state-owned enterprises,D&O liability insurance and corporate governance mechanism form a vicious circle.The incentive effect of D&O liability insurance is more harmful toshareholders of state-owned enterprises,shareholders’ trust is reduced,attention is enhanced,and more prone to active voting behavior and communication behavior.n the high quality financial environment and high quality information environment,the incentive effect of D&O liability insurance is stronger,which protects the interests of shareholders and makes it less likely for shareholders to take positive actions.By studying the economic consequences of the impact of D&O liability insurance on shareholder activism,this paper finds that the shareholder activism behavior of purchasing D&O liability insurance can improve company performance,which indicates that D&O liability insurance exerts corporate governance effect by influencing shareholder activism.The innovations of this paper are as following.Firstly,Based on the interest relationship of D&O liability insurance contracting parties,this paper divides the stakeholder behavior into the aggressive behavior of the main body of D&O liability insurance,that is,the aggressive behavior of listed companies,the prudent behavior of the third party of D&O liability insurance,that is,the creditor’s prudent behavior,and the positive behavior of the third party of D&O liability insurance,that is,the shareholder’s activism behavior.This provides a new perspective for the analysis of stakeholder behavior and expands the study of corporate governance behavior.Secondly,this paper analyses the role of D&O liability insurance in stakeholder behavior.This will help academic circle and practical circle to deeply understand the specific mechanism of D&O liability insurance affecting stakeholder behavior.From the perspective of the content of D&O liability insurance contract,this paper analyses and tests the impact of coverage terms,notification terms and exclusion terms of D&O liability insurance on stakeholders’ behavior.This enriches the relevant literature of law and finance,and provides empirical evidence that the contractual provisions can also play a role in corporate governance.It is convenient for academia and industry to comprehensively understand the incentive effect,supervision effect,moral hazard effect of D&O liability insurance,and differentiated understanding of stakeholder behavior.Thirdly,from the perspective of the contractual environment of D&O liability insurance,this paper studies whether D&O liability insurance exerts different effects because of the different contractual environment.It confirms the importanceof contract environment and warns stakeholders to pay attention to the institutional environment,financial environment and information environment of listed companies.