D&O Insurance,Manager Risk Preference And Corporation Financial Distress

As the domestic and complex environmental effects,Chinese economic development has entered into a "new normal condition." Under the new normal economic development condition,we have to focus on survival and the financial distress faced by enterprises.As a soul in a company,ceos risk preference will directly affect corporate decision-making and development prospects.In this complex competitive environment,what we can do for restricting the manager risk preference are not only the most prominent practitioners of corporate governance issues and corporate finance theorists in recent years,but also a e hot spots and focus.D&O insurance,the Western capital markets risk transfer system,can effectively hedge operational risks and safeguard the interests of all stakeholders,to reduce unnecessary friction agent.However,whether D&O insurance is applicable to the period of economic transition of China's capital market background is still worth further study and discussion.This paper is based on the listed companies' financial data in Shanghai and Shenzhen stock market from 2009-2013.Under the definition of manager risk preference in two dimensions from material wealth and personal background characteristics,the paper constructed two managers risk appetite proxy variable.After using qualitative analysis,empirical analysis and robust test methods,we investigated the relationship between the D&O insurance?managers risk preference and corporation financial distress.The following conclusions are:(1)Manager risk preference and financial distress significant negative correlation and risk-loving managers make it easier to in financial distress;(2)D&O insurance may reduce the risk of financial distress,and the D&O adjustment role is constrained by the probability of the risk-loving behavior thereby reducing corporate financial distress.Our conclusions deepened the D&O insurance on corporate governance theory cognitive understanding,effectively expanding the scope of the study on the manager risk preference by corporate governance in the school,and further improve the corporate financial distress factors research system.,Having reflected the positive effect of providing an effective risk mitigation manager for the hobby theorists and practitioners,D&O insurance provides new governance direction to restrict overconfidence and excessive optimism and other irrational behavior.