Do directors with foreign experience increase the corporate demand for directors' and officers' liability insurance? Evidence from China

Xia, Changyuan; Yang, Junjie; Zhou, Yang; Chan, Kam C.

doi:10.1016/j.econmod.2022.106146

Cited by 9 publications

(4 citation statements)

References 47 publications

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“…One possible explanation is the strong connection between domestic directors and firm executives, which may influence the board's O n l i n e f i r s t supervisory functions (Balsmeier et al, 2014;Liu & Lv, 2022;Masulis et al, 2012). Foreign directors with weaker external connections and diverse backgrounds seem to offer effective monitoring for board governance, which is a pivotal factor in corporate R&D activities (Du et al, 2017;Fabrizio & Richard, 2015;Tao et al, 2022;Xia et al, 2023). It is noteworthy that the relationship between foreign directors and R&D expenditure exhibits heterogeneity at the levels of property rights, industry, and geographical location.…”

Section: Discussionmentioning

confidence: 99%

“…Corporate research and development (R&D) expenditures play a critical role in the process of transforming new technologies into innovative outcomes, consequently attracting increasing attention in the academic literature (e.g., Domazet et al, 2023;Pu & Zulkafli, 2024;Schot & Steinmueller, 2018;Sharma et al, 2022). Strategies concerning R&D expenditure are often intertwined with the board of directors, who are entrusted with the responsibility of protecting shareholder interests and returns (Ali et al, 2021;Xia et al, 2023). The presence of foreign directors among these board members has rarely ignited discussions within the field of firms' innovation O n l i n e f i r s t strategies.…”

Section: Introductionmentioning

confidence: 99%

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Global minds, local impact: Exploring the effect of foreign directors on corporate R&D expenditure

Pu,

Zulkafli

2024

Strategic Management

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Background: In the contemporary business environment, corporate research and development (R&D) expenditure is pivotal for fostering technological innovation and advancing technological progress. While much research has focused on the influence of boards of directors on corporate innovation, the role of foreign directors in shaping corporate R&D expenditure, particularly in developing countries, remains underexplored. Purpose: The aim of this paper is to investigate the pivotal role of foreign directors in corporate R&D expenditure within Chinese listed manufacturing firms. It also provides micro-level evidence of the economic consequences of foreign directors, considering heterogeneity across property rights, industry, regional dimensions, and board positions. Study design/methodology/approach: This study utilizes the largest and most detailed dataset of Chinese listed manufacturing firms in the CSMAR database, offering comprehensive proxy variables. The sample encompasses 18,273 observations from 2008 to 2021. Multivariate regression models, employing static two-way fixed effects models with clustered robust standard errors and dynamic generalized method of moment (GMM) models, were established to investigate the relationship between foreign directors and corporate R&D expenditure. Sensitivity tests involve the substitution of dependent and core explanatory variables. Moreover, heterogeneity test and situational analysis are conducted. Findings/conclusions: The results confirmed a significant augmentation in corporate R&D expenditure attributable to foreign directors. Heterogeneity analysis reveals that the positive impact of foreign directors on R&D expenditure is more pronounced in private-owned enterprises, high-tech industries, and economically developed regions of China. Situational analysis further confirms that foreign independent directors are the main driving force behind this effect. Limitations/future research: This research is confined to a single-country and single-industry sample, without a comprehensive consideration of the individual traits of foreign directors. Future research avenues could involve cross-national comparisons and a more nuanced categorization of foreign directors.

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Section: Discussionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Global minds, local impact: Exploring the effect of foreign directors on corporate R&D expenditure

Pu,

Zulkafli

2024

Strategic Management

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“…(12) Violt : the number of corporate violations. (13) Oversea : if a firm has H, B or other overseas circulating shares (Zou et al 2008 ; Xia et al 2023 ). (14) Turnover : if the first secretary of the provincial Communist Party committee has been replaced.…”

Section: Research Model and Definitions Of Variablesmentioning

confidence: 99%

“…Previous studies on the antecedents of purchases of D&O insurance have focused on litigation risks (Gillan and Panasian 2015 ; Park 2018 ), agency conflicts (Park 2018 ; Zou et al 2008 ), managerial entrenchment (Core 1997 ), corporate governance (Boyer and Stern 2012 ), short selling (Jiang and Su 2022 ), financial distress (Core 1997 ), corporate cultures (Boyer and Stern 2014 ), managerial characteristics (Lai and Tai 2019 ; Xia et al 2023 ), political affiliations (Jia et al 2019 ), and firm characteristics (Xu and Wang 2012 ). However, few have investigated the effects of demand for D&O insurance by EPU.…”

Section: Introductionmentioning

confidence: 99%

Economic policy uncertainty and directors and officers liability insurance: a perspective on capital market pressures

Xie

Lin

2023

Geneva Pap Risk Insur Issues Pract

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This study investigates the effects of economic policy uncertainty (EPU) on corporate purchases of directors and officers liability insurance from the perspective of capital market pressures. Using data on A-share Chinese listed firms from 2010 to 2021, our theoretical analysis and empirical tests reveal that higher levels of EPU increase purchases. The theoretical analysis and mediating tests reveal that capital market pressures play a mediating role in the relationship between EPU and purchases. This study also finds that the indirect ways in which EPU increases purchases consider the need for firms to mitigate litigation risks and take advantage of insurance governance. The heterogeneous analysis and tests reveal that EPU increases purchases more significantly in firms that have higher managerial agency costs, have lower corporate transparency, and are in industries with higher competition. The findings are significant for improving the risk management system in China’s capital markets.

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Navigating legal responsibilities in politically connected firms: Insights into the influence of directors' and officers' insurance on litigation risk

Zhang,

Guo,

Chi

2024

Manage Decis Econ

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This study aims to investigate how directors' and officers' (D&O) liability insurance, legal responsibilities, and firm political connections collectively influence corporate litigation risk. D&O insurance is common, but its effectiveness in limiting litigation risk in diverse legal and political circumstances is questionable. The study employs a quantitative research approach, utilizing regression analysis and moderation techniques. Data are collected from a diverse sample of 411 individuals comprising directors, legal experts, government regulators, public company staff, and insurance providers. Regression models explore the relationships between D&O insurance, legal responsibilities, political connections, and corporate litigation risk. The findings provide practical insights for stakeholders in corporate governance, informing strategies to enhance risk management and compliance frameworks. This study contributes to the existing literature by empirically examining the comprehensive influence of D&O insurance, legal responsibilities, and political connections on corporate litigation risk. It integrates multiple variables and moderating effects to offer a nuanced understanding of corporate governance dynamics. Strategic adoption of D&O insurance can effectively mitigate litigation risks associated with legal responsibilities, although caution is warranted regarding the exacerbating effects of firm political connections. By understanding these dynamics, firms can proactively enhance their governance practices and adapt to regulatory changes, thereby improving overall corporate resilience and sustainability.

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Do directors with foreign experience increase the corporate demand for directors' and officers' liability insurance? Evidence from China

Cited by 9 publications

References 47 publications

Global minds, local impact: Exploring the effect of foreign directors on corporate R&D expenditure

Global minds, local impact: Exploring the effect of foreign directors on corporate R&D expenditure

Economic policy uncertainty and directors and officers liability insurance: a perspective on capital market pressures

Navigating legal responsibilities in politically connected firms: Insights into the influence of directors' and officers' insurance on litigation risk

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