Reports from Hunan University Add New Data to Findings in Corporate Finance (Directors’ and officers’ liability insurance and stock price crash risk)

By a News Reporter-Staff News Editor at Investment Weekly News -- Current study results on Corporate Finance have been published. According to news reporting originating from Changsha, People's Republic of China, by VerticalNews correspondents, research stated, "We investigate the impact of directors' and officers' insurance (D&O insurance) on stock price crash risk. We find that D&O insurance in China is negatively associated with stock price crash risk."

Our news editors obtained a quote from the research from Hunan University, "This association is robust to a series of robustness checks including the use of alternative sample, Heckman two-step sample selection model, propensity score matching procedure, fixed effects model, the inclusion of some possibly omitted variables, and bootstrap method. Further analyses show that the impact of D&O insurance on crash risk is more pronounced in firms with lower board independence, non-Big 4 auditors, lower institutional shareholdings, and weaker investor protection; and the negative relationship between D&O insurance and crash risk is not driven by the eyeball effect. Moreover, we find that D&O insurance purchase is associated with less financial restatements and more disclosure of corporate social responsibility reports."

According to the news editors, the research concluded: "Our findings provide support to the notion that D&O insurance appears to improve corporate governance."

For more information on this research see: Directors' and officers' liability insurance and stock price crash risk. Journal of Corporate Finance, 2016;37():173-192. Journal of Corporate Finance can be contacted at: Elsevier Science Bv, PO Box 211, 1000 Ae Amsterdam, Netherlands. (Elsevier - www.elsevier.com; Journal of Corporate Finance - www.journals.elsevier.com/journal-of-corporate-finance/)

The news editors report that additional information may be obtained by contacting R.L. Yuan, Hunan Univ, Sch Business, 109 Shijiachong Rd, Changsha 410006, Hunan, People's Republic of China. Additional authors for this research include J. Sun and F. Cao.

Keywords for this news article include: Changsha, People's Republic of China, Asia, Corporate Finance, Hunan University.

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