Study On The Influence Of Directors' And Officers' Liability Insurance On Earnings Management Of Listed Companies

In recent years,a large number of financial scandals frequently exposed,with the enhancement of the protection of the interests of investors awareness of class actions against listed companies or shareholders increased gradually.According to "China Times"in 2014 statistics,only the first half of 2014 had 331 listed companies involved in a variety of litigation,approaching the sum of 2013.Directors' and Officers' Liability Insurance as a tool of reduce risk has become the focus of attention.At the same time,research on the Directors' and Officers' Liability Insurance is also growing concern for academics,practitioners and regulators.This article explores the impact of liability insurance for corporate earnings management behavior,which is very important.In this paper,we exploring the relationship between the Directors' and Officers'Liability Insurance and earnings management of listed companies on Shanghai and Shenzhen A-share listed companies 2009-2013 year data.The research finds out that the companies which bought the insurance have a higher level of earnings management.And the insurance have a higher influence on the Low-profit company.The results show that,the Directors' and Officers' Liability Insurance has not been able to play the role to improve the behavior of earnings management under our current system environment.Instead,it promotes the moral hazard and opportunistic behavior of the directors and executives of the insurance company.Based on the empirical evidences,this paper provides some advice on the Directors' and Officers' Liability Insurance in order to prevent earning management actions.