The role of information: When is Directors’ and Officers’ insurance value-added?

Chang, Kai-Han; Ren, Yayuan; Yeh, Jason J. H.

doi:10.1016/j.jbankfin.2018.10.003

Cited by 11 publications

(10 citation statements)

References 34 publications

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“…To the best of our knowledge, our study provides the first empirical evidence that the effectiveness of D&O insurance depends on the information acquired by outside directors. Consistent with the theoretical work of Chang et al (), we find that an increase in D&O insurance coverage only improves the value of firms with well‐informed outside directors. Second, we propose a new channel through which information affects corporate governance and firm value.…”

Section: Introductionsupporting

confidence: 91%

“…Director reputation is another powerful incentive for directors to work hard and monitor the CEO (e.g., Fama and Jensen, ; Yermack, ; Masulis and Mobbs, ). Following Chang et al (), we argue that the information acquired by outside directors also plays a role in affecting directors’ moral hazard in relation to D&O insurance.…”

Section: Hypothesesmentioning

confidence: 84%

“… Director Compensation Package . Chang et al () suggest that a substitute relationship exists between D&O insurance and equity compensation. Firms under pressure to offer generous equity compensation to directors can offer D&O insurance as a substitute for the directors’ incentive pay.…”

Section: Methodsmentioning

confidence: 99%

“…Following the theoretical model of Chang et al (), we propose that when outside directors are well informed, the monitoring effect dominates the moral hazard effect, and D&O insurance adds value to firms and vice versa. Using a sample of firms listed on the Toronto Stock Exchange and included in the S&P/TSX Composite Index from 2010 to 2014, we find that a change in D&O insurance coverage does not, on average, enhance or diminish shareholder wealth, which is consistent with the findings in the literature (Chen and Li, ).…”

Section: Introductionmentioning

confidence: 99%

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Inherent Virtue or Inevitable Evil: The Effects of Directors' and Officers' Insurance on Firm Value

Fung¹,

Yeh²

2018

Risk Manage Insurance Review

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Whether directors' and officers' (D&O) insurance improves firm value is a controversial issue. We perform a literature review about the effect of D&O insurance and find mixed results. The proponents of D&O insurance believe it enhances corporate monitoring and improves firm value, while the opponents of D&O insurance argue that it creates a moral hazard problem and diminishes firm value. Against this backdrop, we argue that the trade-off between the monitoring and moral hazard effects depends on the information acquired by the outside directors. Using a sample of listed Canadian firms, we find that (1) a change in D&O insurance coverage has no net effect on a firm's subsequent value when we ignore the information acquired by outside directors, (2) an increase in D&O insurance coverage improves a firm's subsequent value when the outside directors are well informed, and (3) an increase in D&O insurance coverage reduces a firm's subsequent value when the outside directors are poorly informed. Our findings are robust to endogeneity checks and have important implications for the regulation of D&O insurance.Extract from the judgment for the court case Fox v, Gadsden (2003) NSWSC 748

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Section: Introductionsupporting

confidence: 91%

Section: Hypothesesmentioning

confidence: 84%

Section: Methodsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Inherent Virtue or Inevitable Evil: The Effects of Directors' and Officers' Insurance on Firm Value

Fung¹,

Yeh²

2018

Risk Manage Insurance Review

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“…Providing consumers with valuable experience and enjoyment of the searching process during shopping process is crucial. (Chang et al, 2018). Consumers always feel specific stimuli, generate motivation, bring cognitive or behavioral intentions, and add value through observation or participation (Inversini & Masiero, 2014).…”

Section: Literature Review Theoretical Backgroundmentioning

confidence: 99%

Factors Affecting Consumer Behavior in Omni-Channel Marketing of the Fitness Industry

Lee

2022

Journal of Cases on Information Technology

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The Online to offline (O2O) model has been used as an important strategy for marketers to rethink their Omni-Channel marketing recently. Perceived factors have been studied to investigate the factors that really influence consumers’ attitudes towards channel adoption and their behavioral intentions. This study aimed to explore the relationship between the various dimensions of the O2O marketing model. The research model was conducted to test data collected from the survey questionnaires on 303 subjects. Two key factors of the O2O model, namely searching experience and purchasing experience, were believed to have a significant impact on consumers’ behavioral intentions for channel adoption. The findings of this study could verify the factors that influence the determinants of consumer adoption of O2O channels. The results could strengthen body of literature and provide fitness marketers with further insights into O2O strategy formulation.

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Directors’ and Officers’ Liability Insurance and Overinvestment: Evidence from China

Chen

2020

Proceedings of the Fourteenth International Conference on Management Science and Engineering Management

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The role of information: When is Directors’ and Officers’ insurance value-added?

Cited by 11 publications

References 34 publications

Inherent Virtue or Inevitable Evil: The Effects of Directors' and Officers' Insurance on Firm Value

Inherent Virtue or Inevitable Evil: The Effects of Directors' and Officers' Insurance on Firm Value

Factors Affecting Consumer Behavior in Omni-Channel Marketing of the Fitness Industry

Directors’ and Officers’ Liability Insurance and Overinvestment: Evidence from China

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