{"title":"The Litigation Cost of Cross‐Listing Into the United States","authors":"M. Martin Boyer","doi":"10.1111/corg.12610","DOIUrl":null,"url":null,"abstract":"Research Question/IssueI study the expected liability cost of cross‐listing into the United States by examining the change in the structure of a Canadian firm's directors' and officers' liability insurance contract (D&O insurance) before and after cross‐listing on an exchange located in the United States (NYSE, NASDAQ, or OTC).Research Findings/InsightsResults show that neither the likelihood of having D&O liability insurance increases significantly only when the NASDAQ is the chosen as the cross‐listing venue nor the amount of coverage changes significantly after cross‐listing. With respect to choosing the NYSE as the cross‐listing venue, results show that coverage does not increase, but the premium does. As a result, the D&O insurance premium per dollar of coverage increases significantly only when the firm cross‐lists on the NYSE. A robust point estimate is that a Canadian firm's D&O liability insurance premium increases by 40%–60% when it becomes listed on a US market.Theoretical/Academic ImplicationsD&O insurers adjust their expected litigation costs as a function of where shares are traded not because of the severity of damages paid in the event of litigation, by mostly because of an increase in the frequency of such litigation.Practitioner/Policy ImplicationsIf D&O premium‐to‐coverage ratio allows one to measure a company's litigation risk, then there would be value to investors to have access to basic D&O insurance information such as the premium and the coverage.","PeriodicalId":48209,"journal":{"name":"Corporate Governance-An International Review","volume":null,"pages":null},"PeriodicalIF":4.6000,"publicationDate":"2024-08-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Corporate Governance-An International Review","FirstCategoryId":"91","ListUrlMain":"https://doi.org/10.1111/corg.12610","RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS","Score":null,"Total":0}
引用次数: 0
Abstract
Research Question/IssueI study the expected liability cost of cross‐listing into the United States by examining the change in the structure of a Canadian firm's directors' and officers' liability insurance contract (D&O insurance) before and after cross‐listing on an exchange located in the United States (NYSE, NASDAQ, or OTC).Research Findings/InsightsResults show that neither the likelihood of having D&O liability insurance increases significantly only when the NASDAQ is the chosen as the cross‐listing venue nor the amount of coverage changes significantly after cross‐listing. With respect to choosing the NYSE as the cross‐listing venue, results show that coverage does not increase, but the premium does. As a result, the D&O insurance premium per dollar of coverage increases significantly only when the firm cross‐lists on the NYSE. A robust point estimate is that a Canadian firm's D&O liability insurance premium increases by 40%–60% when it becomes listed on a US market.Theoretical/Academic ImplicationsD&O insurers adjust their expected litigation costs as a function of where shares are traded not because of the severity of damages paid in the event of litigation, by mostly because of an increase in the frequency of such litigation.Practitioner/Policy ImplicationsIf D&O premium‐to‐coverage ratio allows one to measure a company's litigation risk, then there would be value to investors to have access to basic D&O insurance information such as the premium and the coverage.
期刊介绍:
The mission of Corporate Governance: An International Review is to publish cutting-edge international business research on the phenomena of comparative corporate governance throughout the global economy. Our ultimate goal is a rigorous and relevant global theory of corporate governance. We define corporate governance broadly as the exercise of power over corporate entities so as to increase the value provided to the organization"s various stakeholders, as well as making those stakeholders accountable for acting responsibly with regard to the protection, generation, and distribution of wealth invested in the firm. Because of this broad conceptualization, a wide variety of academic disciplines can contribute to our understanding.