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Directors’ and officers’ liability insurance and firm greenwashing: Supervision or opportunism?

Author

Listed:
  • Lin, Xian
  • Tan, Shuying
  • Meng, Hongyu
  • Song, Linjia

Abstract

As concerns over corporate environmental misconduct continue to rise, this study examines the impact of directors' and officers’ (D&O) liability insurance on firm greenwashing. Our findings show that D&O liability insurance curbs greenwashing. Mechanism analysis indicates that this negative impact is driven by improved corporate governance and enhanced information environments. The effect is particularly strong for non-state-owned enterprises, politically connected firms, firms with fewer environmentally oriented executives, and firms facing stronger insurer capacity and regulatory intensity, underscoring the monitoring role of D&O liability insurance. Further analysis indicates that D&O liability insurance can enhance corporate environmental performance and increase environmental expenditure. Overall, the evidence supports the “supervision effect” hypothesis, suggesting that D&O liability insurance can act as a safeguard against environmental misconduct.

Suggested Citation

  • Lin, Xian & Tan, Shuying & Meng, Hongyu & Song, Linjia, 2026. "Directors’ and officers’ liability insurance and firm greenwashing: Supervision or opportunism?," Economic Modelling, Elsevier, vol. 159(C).
    • Handle: RePEc:eee:ecmode:v:159:y:2026:i:c:s0264999326001100
    DOI: 10.1016/j.econmod.2026.107581
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    Keywords

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    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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