Can Drector Liability Insurance Promote Company Performance?—Empirical Evidence Based on Chinese Listed Companies

This paper invests the effects of D&O Liability Insurance in Chinese listed companies. We address the sample selection problem by employing the propensity score matching methodology.To reduce the small sample size bias, we use the bootstrap approach to estimate the standard errors. Results show that, (1) The decision of listed companies to buy D&O Liability Insurance is endogenously determined, so it exists sample selection problem; (2) On the whole, performance is negatively related to D&O Liability Insurance even after controlling for sample selection bias, but the negative relationship has been declined; (3) D&O insurance does not play a positive role in corporate governance, and it makes a marked decline in the company value; (4) Other factors, such as company size, executive compensation, ownership concentration and equity of state owned shares, overseas listing all have significant positive effects on purchase of D&O Insurance, but feasibility, executors share holding shown a significant negative impact on purchase of D&O insurance.