Is corporate governance risk valued? Evidence from directors' and officers' insurance
AbstractWe find that common equity firms pay lower D&O insurance premiums than income trusts, an alternative and riskier ownership form. This result has wide-ranging implications for investors insofar as the information provided by D&O insurers provides investors with an unbiased signal of the firm's governance risk. The signal is unbiased because it comes from an entity (i.e. the insurer) that has a direct financial incentive to correctly assess an organization's governance risk, in contrast to other ad hoc governance measures and indices.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Corporate Finance.
Volume (Year): 18 (2012)
Issue (Month): 2 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/jcorpfin
Corporate governance; D&O insurance; Initial public offerings; Income trusts;
Find related papers by JEL classification:
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies
- J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
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