Directors’ And Officers’ Liability Insurance,debt Contracting And Accounting Conservatism

Accounting conservatism is an important index to measure the quality of financial reports,which is similar to the caution in the quality of accounting information.It requires enterprises to confirm losses in time and not to overestimate assets and income.Both domestic scholars and foreign scholars are very rich in the sources and effects of accounting conservatism,which provides a solid foundation for this study.With the rapid development of China’s capital market and the advancement of internationalization,debt has become the main financing way of the enterprise.Because the shareholders and executives of the enterprise pay attention to the future business and development of the enterprise,the creditor is concerned about the ability of the enterprise to repay the interest.Therefore,there will be a definite conflict of interests between the two,which leads to the agency cost.Produce.Enterprises and creditors will take measures to alleviate conflicts of interest and agency costs,and improve accounting conservatism.Therefore,accounting conservatism can be regarded as the result of the coordination of interests between enterprises and creditors.At present,most of the documents on directors’ and officers’ liability insurance in China are based on the external monitoring role.They emphasize that the supervisory responsibility insurance of the board of directors as a governance mechanism has a positive impact on the company.However,there is a risk of increasing the opportunism of the insured’s management by the company’s purchase of the directors’ liability insurance.This is the most traditional risk of insurance.The directors’ and officers’ liability insurance is the umbrella of the supervisors and senior executives and protects them from litigation losses.Once executives engage in opportunistic behavior,they will damage the interests of small and medium shareholders and creditors.One manifestation of the opportunistic behavior of managers is the adoption of radical financial policies that lead to an increase in the financial risks of the company.Therefore,the liability insurance of the directors and supervisors will also have an adverse effect on the company.This article from liability for targeting will cause moral hazard research perspective,from 2007 to 2015 Shanghai and shenzhen two city a-share main board listed company samples,on debt contracting,debt maturity and accounting conservatism on the empirical analysis of the relationship between key to verify the directors’ and officers’ liability insurance for the above relationship adjustment.Through empirical research,this paper finds that the increase of debt amount of listed companies will increase the demand for accounting conservatism,which shows that debt amount is one of the important sources of accounting conservatism.In addition,due to the debt maturity and is close to the amount of debt,so this article will be carried out in accordance with the time limit for the debts of the enterprise,respectively through empirical study,found that relative to the creditors of long-term debt,short-term debt creditors of a higher demand for accounting conservatism.After introducing the directors’ and officers’ liability insurance as regulating variable,found that the positive influence of debt amount of accounting conservatism,short-term debt further increases in the demand for accounting conservatism,and then there is no apparent change in long-term debt,we think the enterprise purchase directors’ and officers’ liability insurance,increase of accounting conservatism is due to the increase of the moral risk managers to protect the interests of creditors as a result,the different performance of long-term debt and short-term debt is due to the long-term debt of government intervention,and after the introduction of directors’ and officers’ liability insurance as regulating variable,convey to the market signal of executive risk aversion,There is still no significant change in the demand for accounting conservatism,indicating that implicit government support in long-term debt has a strong purpose.