TMT Risk Preference,D&O Insurance And Corporate Innovation

Innovation is not only the strategic support for the country to achieve sustainable economic development,but also the inexhaustible driving force for corporations to maintain their core competitiveness,the high level of innovation is particularly essential to the survival and development of corporations.Senior managers are the decision-making and implementation subjects of corporation behavior,their analysis of the corporate environment and their attitude towards risks are prominently reflected in the investment and financing decision-making and operation,exerting influence on the corporate innovation at the same time.In addition,directors’ and officers’ liability insurance(D&O insurance)has been developed in China for 20 years,the corporate governance role of the liability insurance has gradually attracted the attention of the government,the market and companies.In the existing studies,D&O insurance can encourage managers to reduce risk aversion,innovate boldly,and alleviate corporate governance problems through signal transmission and external supervision,but it may also lead to moral hazard and adverse selection due to the transfer of managers’ liability risk.Therefore,during the process of corporate innovation,the impact of D&O insurance on managers’ decision-making,and then on the performance of innovation is worthy of in-depth study.In this context,combined with the current situation of Chinese companies,starting with the micro subject of top management team(TMT),this paper makes an empirical study on the relationship between the risk preference level of TMT and corporate innovation,and discusses whether the introduction of D&O insurance can play a positive regulatory role between the two,in an attempt to improve the innovation level of Chinese companies and promote the application of D&O insurance in China.This paper takes Shanghai and Shenzhen A-share listed companies from 2014 to 2019 as the research sample,establishes a comprehensive index of TMT risk preference through principal component analysis,and empirically tests the research hypothesis by using multiple regression model.The results show that:(1)the level of TMT risk preference is positively correlated with corporate innovation.(2)the introduction of D&O insurance can promote the positive relationship between the level of risk preference of the TMT and corporate innovation.In further research,from the perspective of corporate heterogeneity and environmental heterogeneity,this paper makes grouping regression on the research samples to explore whether the research hypothesis is tenable under different enterprise backgrounds and external environment.The results show that:(1)In the sample of state-owned enterprises(SOE),the positive correlation coefficient between the risk preference level of TMT and corporate innovation is prominently higher than that in the sample of non-state-owned enterprises(nonSOE);D&O insurance only plays a significant positive regulatory role in the sample of nonSOEs.(2)the corporations in area of low marketization have a higher positive correlation between the risk preference level of TMT and corporate innovation,but the introduction of D&O insurance plays a more significant positive regulatory role in the area of high marketization.The empirical analysis results are robust after the tests such as propensity matching score method,replacing regression model and lagging dependent variables etc.,indicating that the research conclusion is tenable.