Corporate governance and corporate social responsibility: Evidence from directors' and officers' liability insurance

Hui Xia, Shixian Ling, Z. Liu, Sirimon Treepongkaruna
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Abstract

Theoretical theories underpin the governance effect of directors' and officers' (D&O) liability insurance include agency costs and stakeholder interests. Motivated by mixed evidence on the corporate governance effects of D&O, we ask whether and how the directors' and officers' (D&O) liability insurance affects corporate social responsibility (CSR) performance in China, one of the largest and fastest growing economies in the world. We develop two contrasting hypotheses: (1) supervision and incentives versus (2) opportunism. To test these hypotheses, we rely on Chinese A‐share market data and fixed effect panel regressions, along with a battery of robustness checks, including Heckman sample selection bias, two‐stage least square instrumental variable (2SLS‐IV), difference‐in‐difference (DiD), propensity score matching (PSM) analyses. Consistent with supervision and incentives hypotheses and stakeholder theory, we find that D&O liability insurance significantly increases firm's CSR performance and firms renewing D&O liability insurance with the same insurers tend to have better CSR performance. Two possible mechanisms supporting this positive relation between D&O liability insurance and CSR performance are information transparency and accounting conservatism. Aside from theoretical contributions, our findings offer important practical contributions such as promoting D&O as external governance and ensuring the functions of D&O insurance comprehensively and correctly understood. Integrating D&O insurance with CSR can be viewed as an important business strategy by mitigating risks, enhancing reputation, ensuring legal compliance, and supporting responsible decision‐making.
公司治理与企业社会责任:董事和高级职员责任保险的证据
支持董事及高管(D&O)责任保险治理效果的理论包括代理成本和利益相关者利益。由于有关 D&O 公司治理效果的证据参差不齐,我们提出了董事及高管(D&O)责任保险是否以及如何影响中国--世界上最大且发展最快的经济体之一--的企业社会责任(CSR)绩效的问题。我们提出了两个相反的假设:(1)监督和激励与(2)机会主义。为了检验这些假设,我们利用中国 A 股市场数据和固定效应面板回归,并进行了一系列稳健性检验,包括赫克曼样本选择偏差、两阶段最小平方工具变量(2SLS-IV)、差分(DiD)和倾向得分匹配(PSM)分析。与监督和激励假说以及利益相关者理论相一致,我们发现 D&O 责任保险能显著提高公司的企业社会责任绩效,而且向同一保险公司续保 D&O 责任保险的公司往往具有更好的企业社会责任绩效。支持 D&O 责任保险与企业社会责任绩效之间正相关关系的两个可能机制是信息透明度和会计保守主义。除理论贡献外,我们的研究结果还提供了重要的实践贡献,如促进 D&O 作为外部治理,确保全面、正确地理解 D&O 保险的功能。将 D&O 保险与企业社会责任相结合可以被视为一项重要的商业战略,它可以降低风险、提高声誉、确保法律合规性并支持负责任的决策。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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