The Impact Of D&O Liability Insurance On Stock Price Crash Risk

In recent years,the frequent occurrence of stock price plunging of listed companies has greatly affected the normal development of the capital market,and also caused massive losses to investors.The systematic risk caused by the market will not only reduce the efficiency of capital market allocation,but also hinder the progress of substantial economy in China.So,what causes the stock price crash in the stock market,and how to remedy or prevent it,which are not only the problems that should be considered in practice,but also the subject that the academic community needs to study urgently.Bad news hoarding caused by agency problems between shareholders and managers is a widely accepted theory to explain the cause of stock price crash risk,which is essentially a corporate governance problem.Therefore,how to address the corporate governance problem is the key to reducing the stock price collapse risk.D&O liability insurance originated from mature capital markets of Europe and the United States.Its connotation of managerial incentives and external supervision effectiveness has attracted much attention in Western countries,but its effect on corporate governance has been controversial.As a special insurance product that will affect corporate governance issues,what kind of role will it play in the governance of listed companies in China? What impact will it exert on the company's stock price crash risk? With these questions in mind,I select the listed A-share non-financial companies from 2003 to 2016 as the research object,study on the relationship between the D&O liability insurance and the stock price crash risk,and also the intrinsic function mechanism of them.The empirical tests show that:(1)D&O liability insurance is significantly negatively correlated with the stock price crash risk.Companies that have bought the D&O liability insurance show a lower stock price crash risk.(2)The reduction effect of D&O liability insurance on the stock price crash risk is more pronounced when the company's supervision mechanism is weak,and it only exists in state-owned enterprises and regions with higher marketization levels.(3)Path testing found that the D&O liability insurance reduce the stock price crash risk mainly through improving the investment efficiency of enterprises.The specific contents of the thesis include: the first chapter is the introduction,mainly on the research background,purpose and significance of the paper,introduces the research methods and ideas,and the innovation of the thesis;the second chapter is the institutional background and literature review,mainly on a brief explanation of the development of D&O liability insurance in China.And then reviews and summarizes related literature on stock price crash and D&O liability insurance,provides support for theoretical analysis and empirical design in the following;the third chapter is the theoretical analysis and research hypothesis,mainly on reviewing and explaining the theories of corporate governance and liability insurance,and then combine with the relevant research of previous scholars to propose research hypotheses of this paper;the fourth chapter is about empirical test.This part mainly introduces the selection of samples,the definition of variables,the source of data and construction of empirical model tested for the research hypothesis.The preliminary descriptive statistical analysis and correlation analysis on the variables are also carried out in this part;the fifth chapter is empirical results analysis,which is about hypotheses testing and results analyzing,and further research based on the previous results;The sixth chapter is the conclusions and policy recommendations of this article,an overview of the results,through the analysis of the research and puts forward relevant policy suggestions,proposes deficiencies in the research methods and ideas and future research direction at the end.The innovation of this paper is to analyze the effect on the stock price crash risk and function mechanism from the perspective of D&O liability insurance,and the impact of company's equity nature,market process on the relationship between them.