Media coverage and demand for directors’ and officers’ liability insurance—evidence from China

Previous research has documented the impact of internal governance risks and external litigation risks on the demand for D&O insurance. However, the role played by media coverage in this context remains unclear. This study examines the relationship between media coverage and D&O insurance demand using a sample of Chinese A-share listed companies from 2005 to 2019. Our research findings indicate that an increase in media coverage in the previous year significantly enhances the D&O insurance demand for companies in the current year. To mitigate potential selection bias and omitted variable issues, we employ propensity score matching and instrumental variable regression, and the conclusions remain robust. Mechanism analysis suggests that media coverage primarily affects D&O insurance demand through two channels: alleviating information asymmetry and reputation pressure. Further analysis reveals that in companies with more independent directors, greater institutional ownership, and in highly marketized, legally developed regions, the impact of media coverage on D&O insurance demand is more pronounced. However, the CEO’s political affiliation significantly diminishes this effect. This research contributes to a deeper understanding of D&O insurance demand in emerging markets and provides valuable insights for regulatory authorities in recognizing the role of media.