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D&O insurance, technology independent directors, and R&D investment

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  • Shi, Chunling
  • Sun, Yaodong
  • Lyu, Jia

Abstract

This study examines the effect of technology independent directors on firm R&D investment and investigated the influence and mechanism of directors' and officers' liability insurance11We will use “D&O insurance” for “directors' and officers' liability insurance” throughout the article. on the above effect. We find that technology independent directors positively affect R&D investment, and purchasing D&O insurance can significantly enhance this effect by improving the diligence of technology independent directors. The moderating effect of D&O insurance is more pronounced for private firms and younger technology independent directors. These results suggest that D&O insurance positively motivates independent directors to serve their fiduciary duties and provides new empirical evidence on the governance effects of D&O insurance in emerging markets and independent director groups.

Suggested Citation

  • Shi, Chunling & Sun, Yaodong & Lyu, Jia, 2023. "D&O insurance, technology independent directors, and R&D investment," International Review of Financial Analysis, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:finana:v:89:y:2023:i:c:s1057521923003848
    DOI: 10.1016/j.irfa.2023.102868
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