Research On D&O Insurance And Its Influence On Corporate Governance

The directors,supervisors and senior managers of the company may face the risk of personal liability from external class action lawsuits or regulatory investigations when performing their management responsibilities of business decisions and information disclosure.The motivation for companies to purchase D&O insurance is to improve corporate risk management system,encourage them to fulfill their duties and improve corporate governance level.However,since the introduction of D&O insurance in 2002,few cases have occurred,and D&O insurance has not played a role in sharing losses.Therefore,people question the motivation and behavior of listed enterprises to purchase D&O insurance.What kind of companies need D&O insurance?Whether raised the management level of the company after casting insurance?The directors,supervisors and senior managers of the company may face the personal liability risk of class action or regulatory investigation from the outside when performing their management responsibilities such as business decision-making and information disclosure.By reviewing the previous corporate governance theories on D&O insurance at home and abroad,this paper introduces D&O insurance and its basic theories,and discusses the influence of D&O insurance on corporate governance from four aspects:attracting talents,external supervision,management incentive and moral hazard.lt briefly introduces the birth and development of director's liability insurance and analyzes the current situation and future of director's insurance in China with the changes of legal system.Then it analyzes the corporate characteristics of the insured D&O insurance in detail,which lays the foundation for the later research by using the scoring tendency matching method.This article collect 2004-2018 listed companies in Shanghai and shenzhen two city director liability insurance of sample data,analysis the characteristic of sample companies,the study found that:the larger the firm size,profitability,can the strong,equity the more internationalization,industry more rigorous regulation,company asset-liability ratio is higher,executive compensation,the higher the enterprises are more likely to buy the directors liability insurance.Further,we took these sample enterprises as the research group,and then,based on these characteristics,we used scoring propensity matching method to find similar samples for matching to build the reference group.The analysis results of the propensity score matching method show that the purchase of D&O insurance can indeed improve the level of corporate governance to some extent,but the results are not significant.Under the current social system and legal system of our country,directors,supervisors and senior managers are faced with low personal liability risk and weak demand for D&O insurance.D&O insuraince plays a limited role in providing risk protection and improving the company's risk management system.Making full use of it as an external incentive to improve the level of corporate governance is the development direction of director's liability insurance to provide services for enterprises in the future.