New Findings from Northwestern Polytechnic University in the Area of Finance Reported (Why Do Firms Purchase Directors and Officers Liability Insurance? – a Perspective From Short Selling Threats): Business – Finance

2023 JAN 19 (NewsRx) -- By a News Reporter-Staff News Editor at NewsRx Policy and Law Daily -- Current study results on Business - Finance have been published. According to news originating from Xi’an, People’s Republic of China, by NewsRx correspondents, research stated, “This study examines the role of increased short selling threats in firms’ directors and officers liability insurance (D&O insurance) purchase decision against the backdrop of the Chinese deregulation of short sale. Using a difference-in-differences (DiD) research design, we demonstrate a positive effect of short selling threats on firms’ likelihood of purchasing D&O insurance policies after controlling for the known determinants of D&O insurance.”

Funders for this research include National Natural Science Foundation of China (NSFC), Fundamental Research Funds for the Central Universities in Northwestern Polytechnical University.

Our news journalists obtained a quote from the research from Northwestern Polytechnic University, “We then perform tests to validate the DiD analysis result, including a test of the parallel trend assumption and placebo tests. To shed light on the mechanism through which the effect of short selling takes place, we perform a path analysis. The results reveal that firms’ litigation risk explains the effect of short selling pressure on D&O insurance purchase decision.”

According to the news editors, the research concluded: “Further cross-sectional analyses show that the positive effect of short selling threats on D&O insurance is ameliorated when firms have strong internal control or have great analyst coverage.”

This research has been peer-reviewed.

For more information on this research see: Why Do Firms Purchase Directors and Officers Liability Insurance? - a Perspective From Short Selling Threats. European Journal of Finance, 2022. European Journal of Finance can be contacted at: Routledge Journals, Taylor & Francis Ltd, 2-4 Park Square, Milton Park, Abingdon OX14 4RN, Oxon, England.

The news correspondents report that additional information may be obtained from Kun Su, Northwestern Polytechnic University, School of Management, Xian, People’s Republic of China.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1080/1351847X.2022.2146522. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

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