The Multifaceted Impact of Directors and Officers (D&O) Insurance on Corporate Governance and Performance

Main Article Content

Xue Chang


In the ever-evolving capital market, safeguarding shareholder rights and interests is paramount for Chinese listed companies facing escalating risks. This article explores the dynamic discourse surrounding Directors and Officers (D&O) insurance, focusing on its implications in emerging markets with lower institutional support and disclosure quality. Spanning 2000 to 2020, this study rigorously examines the impact of D&O insurance in China, investigating its associations with capital markets, regulatory frameworks, managerial practices and financial reporting. My analysis reveals that D&O insurance correlates negatively with CEO turnover and litigation risk. However, its influence on investment efficiency, earnings management, financial reporting and corporate governance is comparatively modest. I also uncover nuanced disparities between stateowned enterprises (SOEs) and non-state-owned enterprises (non-SOEs). In SOEs, where CEOs are appointed by the government and litigation risk is lower, D&O insurance’s impact is less pronounced. Conversely, non-SOEs, facing higher litigation risk, find greater significance in D&O insurance as protection against legal action. In summary, this article highlights D&O insurance’s role as a protective shield for CEOs and underscores its evolving dynamics in Chinese listed companies’ corporate governance and risk management.

Article Details

How to Cite
The Multifaceted Impact of Directors and Officers (D&O) Insurance on Corporate Governance and Performance. (2024). Asian Academy of Management Journal of Accounting and Finance, 20(1), 1-39.


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