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The Corporate Governance Function of Directors and Officers Liability Insurance——Based on the Aspect of the Two Kinds Agency Costs

【Authors】
LING Shixian, BAI Ruifeng
【WorkUnit】
Business School of Shandong University
【Abstract】

Directors and Officers Liability Insurance (DOI) is a hot issue in the field of corporate finance and corporate governance, but its governance function hasn't been unanimously recognized. Based on the data of the listed companies of China from 2009 to 2015, using the methods of OLS, Heckman two stages and PSM, the relationships among DOI variables and the two kinds agency costs were tested. The results showed that all the DOI variables played incentive effect and external supervision effect, which could effectively reduce the agency costs of the listed companies, and DOI was an effective governance mechanism. At the same time, the governance function of DOI was stronger to the non-state owned listed companies than to the state-owned listed companies. The research suggested strengthening the study of the governance mechanism of DOI, and strengthening the environment and system construction of the implementation of DOI.

JEL:G22, G34, L25

【KeyWords】
Directors and Officers Liability Insurance, Corporate Governance, Agency Cost, Incentive Effect, Supervision Effect