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Examining the D&O insurance effect on managerial ability

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  • Lin, Feng-Yi
  • Guan, Liming
  • Ho, Chia-Ling
  • Wang, Teng-Shih

Abstract

This research investigates the relation between directors’ and officers’ insurance (hereafter, D&O insurance) and managerial ability. Using data from the Taiwan capital markets from 2011 to 2017, we find that D&O insurance increases managerial ability and show that the effect of D&O insurance on managerial ability is more prevalent when a firm is in the following situations: 1) CEO is in the early stage of tenure, 2) the firm belongs to a family-controlled group, and 3) the firm has higher environmental uncertainty. Finally, our study shows that D&O insurance strengthens the relation between managerial ability and firm performance.

Suggested Citation

  • Lin, Feng-Yi & Guan, Liming & Ho, Chia-Ling & Wang, Teng-Shih, 2022. "Examining the D&O insurance effect on managerial ability," Finance Research Letters, Elsevier, vol. 46(PA).
    • Handle: RePEc:eee:finlet:v:46:y:2022:i:pa:s1544612321003317
    DOI: 10.1016/j.frl.2021.102297
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