Directors' And Officers' Liablity Insurance,Agency Costs And Investment Efficiency

In recent years,with the continuous improvement of the legal system and the continuous strengthening of investor protection awareness,besides large numbers of financial scandals have been exposed,the reputation and ability of the directors and senior executives of various companies have been widely concerned and even questioned by the community,which brings investigated and responsible risks to directors and senior executives.Therefore,as a kind of insurance to protect the legitimate interests of directors and senior executives of listed companies,the directors' and officers' liability insurance has attracted more and more attention.At present,the directors' and officers' liability insurance has become a research hotspot in corporate governance and investment.In fact,since the 1990 s,many foreign scholars have carried out theoretical and empirical research ondirectors' and officers' liability insurance from variousaspects and formed a series of relatively complete insurance demand purchase theory system around theinsurance.These theories include the external supervision of directors' liability insurance,the protection of shareholders' interests,the moral hazard of managers,the risk aversion of management,and the signal transmission.With the continuous deepening of the research on directors' liability insurance,more and more domestic scholars have combined Chinese special national conditions,and analyzed the insurance from the aspects of jurisprudence,demand and role,and formed a series of more consistent views.However,due to the relatively short time for the introduction of directors' liability insurance in China,and the lack of sufficient attention,the overall insurance coverage is stillnot high.In the field of academic research,the research on the corporate governance role of directors' and officers' liability insurance from the empirical level is relatively scarce.Few scholars have studied the investment efficiency and the influence path of directors' and officers' liability insurance.In modern enterprises,the level of investment efficiency is related to the growth of company performance and the enhancement of corporate value.In recent years,there have been a large number of blind expansionary investments in listed companies in China,which led to an increase in non-efficiency investment.In addition,the information asymmetry problem and the principal-agent problem that are common in the capital market increase the agency cost of listed companies.As we all know,agency costs are one of the important factors affecting the investment efficiency of listedcompanies.From the current research,on one hand,director executive liability insurance can act as an external supervision mechanism to supervise whether the behavior of directors and senior executives of listed companies is reasonable and lawful,reduce the possibility of opportunistic behavior,and thus reduce the agency cost of the company and finally achieve the purpose of promoting the company's investment efficiency.On the other hand,the protection of directors,supervisors and officers by directors' liability insurance may also exacerbate moral hazard,making executives more unscrupulous in the course of practice and leading to increased agency costs,ultimately reducing the company's investmenteffectiveness.From this point of view,the director's executive liability insurance will not only directly affect the investment efficiency of listed companies,but also indirectly affect the company's investment efficiency through variables such as agency costs.Based on the perspective of insurance demand theory and principal-agent theory,Select the financial data of listed companies in Shanghai and Shenzhen stock markets from 2008 to 2017,and manually collect data on directors' and officers' liability insurance.In further grouping non-efficiency investments into over-investment and under-investment,using normative analysis,descriptive statistics,correlation analysis and regression analysis and other research methods to discuss the relationship between directors' and officers' liability insurance,agency costs and investment efficiency.And we finally drew the conclusion that:There is a significant positive correlation between directors' and officers' liability insurance and investment efficiency.The specific performance is that it has a significant restrain effect on both over investment and under investment;Both types of agency costs are significantly negatively correlated with investment efficiency.Whether it is the first type of agency cost between management and shareholders,or the second type of agency cost between major shareholders and small and medium shareholders,they both have a significant restrain effect on investment efficiency.Finally,after further research,we found that: Directors' and officers' liability insurance can effectively reduce the two types of agency costs of the enterprise.It not only has a direct impact on a company's investment efficiency,it will also indirectly affect a company's investment efficiency through the intermediary variable as agency costs.Agency costs play a mediating role in the process of directors' and officers' liability insurance affecting a corporate's investment efficiency.