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Far-sighted through mitigating risk: Directors and officers liability insurance and corporate ESG performance

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  • Yang, Runze
  • Wu, Junwei
  • Yang, Cunyi
  • Albitar, Khaldoon

Abstract

Based on data from China A-share listed companies over the period 2011 to 2021, this paper explores the role of Directors & Officers Liability Insurance (henceforth referred to as D&O insurance) in enhancing the corporate ESG performance. Findings suggest that the procurement of D&O insurance effectively enhances corporate ESG performance, thereby improving societal appraisal of the corporation. Moreover, through employing mediating effect analysis, we find that D&O insurance not only mitigates corporate short-termism but also stimulates governance initiatives, and consequently elevates corporate ESG performance. Additionally, the positive impact of D&O insurance on a company's ESG performance demonstrates significant heterogeneity across different corporate ownership structures and levels of regional marketization. This paper presents compelling evidence supporting the promotion of D&O insurance alongside the progress of ESG frameworks in China. This dual approach significantly contributes to fostering sustainable development within the real economy.

Suggested Citation

  • Yang, Runze & Wu, Junwei & Yang, Cunyi & Albitar, Khaldoon, 2024. "Far-sighted through mitigating risk: Directors and officers liability insurance and corporate ESG performance," International Review of Financial Analysis, Elsevier, vol. 96(PB).
    • Handle: RePEc:eee:finana:v:96:y:2024:i:pb:s1057521924006513
    DOI: 10.1016/j.irfa.2024.103719
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    More about this item

    Keywords

    Directors & officers liability insurance; Corporate ESG performance; Corporate governance; Sustainable development;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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