D& O Insurance And The Enterprise Risk-taking

The level of risk taking is favored by accounting theory and practice circles duing to the maneuverability of the means?diversity of methods?the controllability of practice?profitability of the results?and the pervasiveness of the influence.All the time,The research on the risk taking level emerges one after another.With the steady development of China's capital market,the gradual improvement of modern enterprise system construction,improving the risk taking ability of enterprises has also developed from the initial corporate governance problem to an indispensable and necessary means of enterprise economic development.No matter what the purpose is,the risk taking level of an enterprise is closely related to its own economic strength and performance,so it has an important impact on managers' investment decisions.Because of this,the various stakeholders of the enterprise pay special attention to it,thus they take all kinds of methods to improve the enterprise's risk bearing capacity.Nowadays,there are many ways to improve the level of enterprise risk exposuring of the existing research more focused on by political association,the external measures,such as monetary policy,and equity incentive,internal control,internal measures to improve the level of enterprise's risk bearing,there are few literatures focus on the influence of D&O insurance risk bearing level of the enterprise.D&O insurance originated in the United States in the 1930 s and was formally introduced to China in 2002.The insurance has an important influence on the risk taking of enterprises.On the one hand,D&O insurance as a kind of protection is the effective means to executives and directors,he did not worry how to make the management to make decisions,and don't have to worry about the decision-making errors and the risk of litigation.This protective effect,making executives have an unprecedented sense of security and belonging,natural will gain and loss of earnings together,so as to make gains from high risk and investment decisions,on the other hand,the insurance company as an independent operators will be insured for the company's operating condition to conduct a comprehensive supervision and control,this is mainly embodied in h.k investigation,the supervision of the insured and the premium of different standards,etc.,this kind of scrutiny may modify the behavior of corporate executives,make its cannot choose high risk investment projects,so as to reduce the risk of the enterprise level.In addition,considering the nature of differentownership and marketization process can make the enterprise different administrative intervention,the gap will undoubtedly influence the enterprise investment behavior,so the author to the nature and ownership marketization as the external environment factors to join in the research of this paper.Finally,this paper studies the influence of risk bearing level on enterprise value after purchasing D&O insurance,with a view to obtaining corresponding economic consequences.Based on the Shanghai and shenzhen two city from 2010 to 2014 in China a-share listed companies as samples,analyzing the D&O insurance and the relationship between enterprise risk bearing,and according to the nature of the property of the sample companies after the grouping,marketization degree and the further investigated under different property rights nature and marketization degree of D&O coverage influence the inner mechanism of the enterprise risk bearing level.The results show that:(1)D&O insurance has a significant positive effect on the risk taking of the enterprise;(2)the positive effect of D&O insurance on the risk bearing level of enterprises is more obvious in the private enterprises.In the state-owned enterprises,D&O insurance has no influence on the risk level of the enterprise;(3)the marketization process also has a positive effect on the risk bearing level of the enterprise;(4)the level of risk exposure can increase the value of the enterprise,the relationship is not only in the current period can promote the enterprise value,but also can improve the next issue of the enterprise value,at the same time,the relationship between them has nothing to do with whether to buy the D&O insurance.The possible innovations and contributions of this paper are:(1)to enrich the literature research of D&O insurance and risk undertaking,and to bring the two together,and draw corresponding conclusions.This paper starts from the influence of D&O insurance on the behavior of executives,and provides a new definition for research on the risk taking of enterprises.(2)studying on the impact of different external environment on the risk taking of enterprises based on the property right nature and marketization process.The existing research focuses more on the influence of external system or internal control on the risk of enterprises,and less literature focuses on the important factor of ownership of enterprises.This paper analyzes the differences in risk taking behavior of enterprises with different property rights,and examines the effect of marketization process on this difference.This helps us to understand theoretically more deeply and risk choice of enterprise investment decision.(3)the sample companies classified according to whether D&O insuranceenterprise,to explore the relationship between enterprise risk bearing capacity and its economic consequences,and found that the company's internal incentive mechanism(D&O insurance)not obvious influence on the relationship,the research conclusion of this paper can for our country with different internal control mechanism of enterprise to improve its corporate governance to provide certain reference.According to the regression results,this paper get the following enlightenment:first,the risk level of the sustainable development of enterprise,performance of ascension,to maximize the profits of shareholders having positive role,in addition to their own efforts,Chinese relevant departments should be encouraged to industry competition,improving the innovation ability of enterprises,for industry to create a harmonious and stable market environment,ultimately promote the development of market economy as a whole.In addition,excessive government intervention and policy support for the development of the enterprise itself and even the society as a whole,should be appropriate to speed up the marketization process,break the administrative monopoly of state-owned enterprises and supporting policy,the rational allocation of market resources,as a state-owned enterprises and non-state-owned enterprises to build a complete and fair system background,on the basis of strengthening supervision,further standardize enterprise behavior.