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Does D&O insurance matter for stock price crash risk? Evidence from an Asian emerging market

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Bibliographische Detailangaben
Zeitschriftentitel: Journal of Capital Markets Studies
Personen und Körperschaften: Lee, Ming-Te, Nien, Kai-Ting
In: Journal of Capital Markets Studies, 3, 2019, 1, S. 34-46
Format: E-Article
Sprache: Englisch
veröffentlicht:
Emerald
author_facet Lee, Ming-Te
Nien, Kai-Ting
Lee, Ming-Te
Nien, Kai-Ting
author Lee, Ming-Te
Nien, Kai-Ting
spellingShingle Lee, Ming-Te
Nien, Kai-Ting
Journal of Capital Markets Studies
Does D&O insurance matter for stock price crash risk? Evidence from an Asian emerging market
author_sort lee, ming-te
spelling Lee, Ming-Te Nien, Kai-Ting 2514-4774 Emerald http://dx.doi.org/10.1108/jcms-03-2019-0009 <jats:sec> <jats:title content-type="abstract-subheading">Purpose</jats:title> <jats:p>The purpose of this paper is to address the opposing views of the relationship between directors’ and officers’ liability insurance (D&amp;O insurance) and stock price crash risk in a major Asian emerging stock market.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Design/methodology/approach</jats:title> <jats:p>This paper finds an endogenous relationship between D&amp;O insurance and stock price crash risk. Hence, the two-stage least squares regression analysis is used to address the endogeneity issue when the relationship is examined. Moreover, this paper further controls the quality of other corporate governance mechanisms to investigate whether D&amp;O insurance still has an effect on stock price crash risk.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Findings</jats:title> <jats:p>The effect of D&amp;O insurance coverage is significantly negatively related to firm-specific stock price crash risk in Taiwan. More importantly, even when the quality of other corporate governance mechanisms is controlled, the negative relationship between D&amp;O insurance coverage and firm-specific stock price crash risk remains significant. The evidence supports that D&amp;O insurance serves as an effective external monitoring mechanism, strengthens corporate governance, and thus reduces stock price crash risk.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Originality/value</jats:title> <jats:p>Emerging Asian markets suffer a dearth of research on the relationship of D&amp;O insurance coverage and the firm-specific stock price crash risk. Investigating the relationship in Taiwan, the present study fills the research void. The findings show that D&amp;O insurance plays an important role in reducing stock price crash risk of Taiwanese firms even when other corporate governance mechanisms are in place.</jats:p> </jats:sec> Does D&O insurance matter for stock price crash risk? Evidence from an Asian emerging market Journal of Capital Markets Studies
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title Does D&amp;O insurance matter for stock price crash risk? Evidence from an Asian emerging market
title_unstemmed Does D&amp;O insurance matter for stock price crash risk? Evidence from an Asian emerging market
title_full Does D&amp;O insurance matter for stock price crash risk? Evidence from an Asian emerging market
title_fullStr Does D&amp;O insurance matter for stock price crash risk? Evidence from an Asian emerging market
title_full_unstemmed Does D&amp;O insurance matter for stock price crash risk? Evidence from an Asian emerging market
title_short Does D&amp;O insurance matter for stock price crash risk? Evidence from an Asian emerging market
title_sort does d&o insurance matter for stock price crash risk? evidence from an asian emerging market
url http://dx.doi.org/10.1108/jcms-03-2019-0009
publishDate 2019
physical 34-46
description <jats:sec> <jats:title content-type="abstract-subheading">Purpose</jats:title> <jats:p>The purpose of this paper is to address the opposing views of the relationship between directors’ and officers’ liability insurance (D&amp;O insurance) and stock price crash risk in a major Asian emerging stock market.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Design/methodology/approach</jats:title> <jats:p>This paper finds an endogenous relationship between D&amp;O insurance and stock price crash risk. Hence, the two-stage least squares regression analysis is used to address the endogeneity issue when the relationship is examined. Moreover, this paper further controls the quality of other corporate governance mechanisms to investigate whether D&amp;O insurance still has an effect on stock price crash risk.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Findings</jats:title> <jats:p>The effect of D&amp;O insurance coverage is significantly negatively related to firm-specific stock price crash risk in Taiwan. More importantly, even when the quality of other corporate governance mechanisms is controlled, the negative relationship between D&amp;O insurance coverage and firm-specific stock price crash risk remains significant. The evidence supports that D&amp;O insurance serves as an effective external monitoring mechanism, strengthens corporate governance, and thus reduces stock price crash risk.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Originality/value</jats:title> <jats:p>Emerging Asian markets suffer a dearth of research on the relationship of D&amp;O insurance coverage and the firm-specific stock price crash risk. Investigating the relationship in Taiwan, the present study fills the research void. The findings show that D&amp;O insurance plays an important role in reducing stock price crash risk of Taiwanese firms even when other corporate governance mechanisms are in place.</jats:p> </jats:sec>
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description <jats:sec> <jats:title content-type="abstract-subheading">Purpose</jats:title> <jats:p>The purpose of this paper is to address the opposing views of the relationship between directors’ and officers’ liability insurance (D&amp;O insurance) and stock price crash risk in a major Asian emerging stock market.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Design/methodology/approach</jats:title> <jats:p>This paper finds an endogenous relationship between D&amp;O insurance and stock price crash risk. Hence, the two-stage least squares regression analysis is used to address the endogeneity issue when the relationship is examined. Moreover, this paper further controls the quality of other corporate governance mechanisms to investigate whether D&amp;O insurance still has an effect on stock price crash risk.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Findings</jats:title> <jats:p>The effect of D&amp;O insurance coverage is significantly negatively related to firm-specific stock price crash risk in Taiwan. More importantly, even when the quality of other corporate governance mechanisms is controlled, the negative relationship between D&amp;O insurance coverage and firm-specific stock price crash risk remains significant. The evidence supports that D&amp;O insurance serves as an effective external monitoring mechanism, strengthens corporate governance, and thus reduces stock price crash risk.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Originality/value</jats:title> <jats:p>Emerging Asian markets suffer a dearth of research on the relationship of D&amp;O insurance coverage and the firm-specific stock price crash risk. Investigating the relationship in Taiwan, the present study fills the research void. The findings show that D&amp;O insurance plays an important role in reducing stock price crash risk of Taiwanese firms even when other corporate governance mechanisms are in place.</jats:p> </jats:sec>
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spelling Lee, Ming-Te Nien, Kai-Ting 2514-4774 Emerald http://dx.doi.org/10.1108/jcms-03-2019-0009 <jats:sec> <jats:title content-type="abstract-subheading">Purpose</jats:title> <jats:p>The purpose of this paper is to address the opposing views of the relationship between directors’ and officers’ liability insurance (D&amp;O insurance) and stock price crash risk in a major Asian emerging stock market.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Design/methodology/approach</jats:title> <jats:p>This paper finds an endogenous relationship between D&amp;O insurance and stock price crash risk. Hence, the two-stage least squares regression analysis is used to address the endogeneity issue when the relationship is examined. Moreover, this paper further controls the quality of other corporate governance mechanisms to investigate whether D&amp;O insurance still has an effect on stock price crash risk.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Findings</jats:title> <jats:p>The effect of D&amp;O insurance coverage is significantly negatively related to firm-specific stock price crash risk in Taiwan. More importantly, even when the quality of other corporate governance mechanisms is controlled, the negative relationship between D&amp;O insurance coverage and firm-specific stock price crash risk remains significant. The evidence supports that D&amp;O insurance serves as an effective external monitoring mechanism, strengthens corporate governance, and thus reduces stock price crash risk.</jats:p> </jats:sec> <jats:sec> <jats:title content-type="abstract-subheading">Originality/value</jats:title> <jats:p>Emerging Asian markets suffer a dearth of research on the relationship of D&amp;O insurance coverage and the firm-specific stock price crash risk. Investigating the relationship in Taiwan, the present study fills the research void. The findings show that D&amp;O insurance plays an important role in reducing stock price crash risk of Taiwanese firms even when other corporate governance mechanisms are in place.</jats:p> </jats:sec> Does D&O insurance matter for stock price crash risk? Evidence from an Asian emerging market Journal of Capital Markets Studies
spellingShingle Lee, Ming-Te, Nien, Kai-Ting, Journal of Capital Markets Studies, Does D&amp;O insurance matter for stock price crash risk? Evidence from an Asian emerging market
title Does D&amp;O insurance matter for stock price crash risk? Evidence from an Asian emerging market
title_full Does D&amp;O insurance matter for stock price crash risk? Evidence from an Asian emerging market
title_fullStr Does D&amp;O insurance matter for stock price crash risk? Evidence from an Asian emerging market
title_full_unstemmed Does D&amp;O insurance matter for stock price crash risk? Evidence from an Asian emerging market
title_short Does D&amp;O insurance matter for stock price crash risk? Evidence from an Asian emerging market
title_sort does d&o insurance matter for stock price crash risk? evidence from an asian emerging market
title_unstemmed Does D&amp;O insurance matter for stock price crash risk? Evidence from an Asian emerging market
url http://dx.doi.org/10.1108/jcms-03-2019-0009