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Do directors with foreign experience increase the corporate demand for directors' and officers' liability insurance? Evidence from China

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  • Xia, Changyuan
  • Yang, Junjie
  • Yang, Zeng
  • Chan, Kam C.

Abstract

Do directors with foreign experience increase the corporate demand for directors' and officers' liability (D&O) insurance? Previous studies have documented the impacts of firms having D&O insurance on corporate practices. However, it is unclear how a firm's decision to acquire D&O insurance is made in an emerging market. Using a sample of Chinese firms from 2008 to 2018, we examine the impact of having overseas returnee directors (ORDs) on a firm's demand for D&O insurance. Our findings suggest that firms with ORDs are likely to have such insurance. Further analyses suggest that the association is more pronounced for firms with a high level of internationalization or located in high marketization regions (i.e., locations with a well-functioning market system). Hence, a firm's internationalization and its location's marketization are the mechanisms for the impact. Our results advance the literature on the effect of personnel internationalization on the demand for D&O insurance.

Suggested Citation

  • Xia, Changyuan & Yang, Junjie & Yang, Zeng & Chan, Kam C., 2023. "Do directors with foreign experience increase the corporate demand for directors' and officers' liability insurance? Evidence from China," Economic Modelling, Elsevier, vol. 119(C).
    • Handle: RePEc:eee:ecmode:v:119:y:2023:i:c:s0264999322003832
    DOI: 10.1016/j.econmod.2022.106146
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    More about this item

    Keywords

    Directors' and officers' liability insurance; Overseas returnee directors; Power distance; Individualism; Uncertainty avoidance culture; China;
    All these keywords.

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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