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Directors’ and officers’ liability insurance and carbon emissions

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  • Wang, Qianyi
  • Lou, Xinyi
  • Wang, Zhan

Abstract

As climate-related issues become more serious, companies face mounting pressure to promote environmental governance. In this study, we examine companies’ carbon emissions behavior from the perspective of corporate risk-taking. Analyzing China's company-level carbon emissions data from 2011 to 2021, we find that firms with directors’ and officers’ liability insurance (D&O insurance) have higher carbon emissions intensity. We then find that the D&O insurance–carbon emissions relationship exists among firms not involved in litigation in the previous year. Furthermore, this relationship becomes more pronounced when companies are under financial distress or have a higher number of analysts following them. Our results support the argument that companies with high risk-taking capacity exhibit greater polluting behavior.

Suggested Citation

  • Wang, Qianyi & Lou, Xinyi & Wang, Zhan, 2024. "Directors’ and officers’ liability insurance and carbon emissions," Finance Research Letters, Elsevier, vol. 69(PA).
    • Handle: RePEc:eee:finlet:v:69:y:2024:i:pa:s154461232401167x
    DOI: 10.1016/j.frl.2024.106138
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    More about this item

    Keywords

    D&O insurance; Carbon emissions; Risk-taking;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • 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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