Directors’ And Officers’ Liability Insurance And Corporate Social Responsibility

Corporate social responsibility is a legal obligation that is increasingly valued by all sectors of society.From the corporate level,fulfilling social responsibility can help improve employee cohesion,enhance corporate brand reputation,and strengthen government enterprise cooperation.It is one of the important factors for sustainable development of enterprises.However,there is uncertainty in the future earnings of corporate social responsibility investment.Bearing corporate social responsibility will also reduce short-term financial performance of the enterprise,increase litigation risk for management,and reduce executive performance compensation.Therefore,executives will choose to reduce their investment in corporate social responsibility.On March 1,2020,the Securities Law of the People’s Republic of China(hereinafter referred to as the new "Securities Law")increased the penalties imposed on enterprises,their directors,senior executives,and directly responsible persons,with the maximum multiple of the penalty amount being 20 times higher than the original provisions.Therefore,for directors and executives,the new Securities Law has brought higher litigation risks.As a tool for directors and executives to avoid professional risks,directors’ and officers’ liability insurance can reduce risk aversion among executives,and insurance companies,as external supervisory agencies,have a supervisory effect on executives.Does the introduction of directors’ and officers’ liability insurance have an impact on the performance of corporate social responsibility?Based on this,this thesis discusses the above issues based on the relevant data of A-share listed companies from 2010 to 2020.The research results show that purchasing directors’ and officers’ liability insurance can promote corporate social responsibility,in which internal control plays a mediating effect.After using the lag effect test,propensity score matching method,Heckman two-stage model,replacement indicator measurement method,and stepwise regression method to conduct robustness tests on the above promoting and mediating effects,it is found that the research results of this thesis are still valid.In addition,this thesis conducts a heterogeneity analysis from three dimensions: the personal characteristics of managers,the nature of the company,and the detailed classification of corporate social responsibility.The following conclusions are drawn: Director’s and officers’ liability insurance can better enhance the level of corporate social responsibility in non-state owned enterprises,enterprises with older senior executives or fewer female senior executives,compared to other detailed classifications of corporate social responsibility,the insurance can significantly promote the performance of employee responsibilities,supplier and customer responsibilities,and environmental responsibilities in corporate social responsibility.The paper also analyzes the moderating effect of external monitoring.The analysis of the moderating effect of external supervision also reveals that external supervision will strengthen the role of D&O insurance in improving the level of corporate social responsibility.The research results of this thesis provide empirical evidence to deepen the impact of D&O insurance on governance,and provide decision-making reference for promoting enterprises to fulfill their social responsibilities.