The Impact And Mechanism Of Directors' And Officers' Liability Insurance On The Investment Efficiency Of Listed Companies

Directors' and Officers' liability insurance is a kind of insurance that can reduce individual occupational risk and compensation liability by transferring litigation risk and litigation cost to the insurer when directors' and officers' liability are sued by a third party.The purpose is to reduce the occupational risk of directors' and officers' liability.Compared with developed countries in Europe and America,the insurance rate of D&O insurance in China is far lower than its insurance level,and it has great development potential.So far,the corporate governance function of directors' and officers' liability insurance has not been unanimously recognized in the academic circle: one side believes that D&O insurance has the function of external supervision;the other side believes that D&O insurance can stimulate the moral hazard of the management.Therefore,whether from the practical or theoretical level,the role of the governance function of directors' and officers' liability insurance and the transmission mechanism of investment efficiency of listed companies are issues that require further in-depth research.Based on standard finance theory and behavioral finance theory,combining asymmetric information theory and principal-agent theory,this paper studies the correlation between D&O insurance and listed companies' inefficient investment from the perspective of managers' overconfidence and accounting information quality.After by combing related theoretical mechanisms,this paper selects 3449 a-share listed companies in China as the research sample from 2005 to 2018.We search the D&O insurance data of the listed company from China information database and Wind financial terminal.Then analyze the D&O insurance influence on the investment efficiency of listed companies,and select managers' overconfidence and the quality of accounting information to study the mechanism deeply.In addition,this paper also uses the PSM-DID model and dynamic model methods for robustness testing.The research conclusions of this paper are as follows: First,the D&O insurance plays more of its external supervision function,which can reduce the degree of inefficient investment of enterprises.Secondly,the D&O insurance for directors and officers liability reduces the level of inefficient investment by restraining managers' overconfidence.Thirdly,by improving the quality of accounting information,D&O insurance reduces the degree of inefficient investment of enterprises.Based on the above findings,this paper puts forward the following suggestions: first,China needs to improve the D&O insurance system;Second,China should strengthen governance managers' overconfidence in investment decision errors;Third,listed companies should improve the quality of accounting information to improve the efficiency of enterprise investment.