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Directors' and officers' liability insurance, information disclosure and corporate investment efficiency

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  • Tang, Wenping
  • Yeung, Chak Ha
  • Lu, Xiao

Abstract

This paper selects data from A-share listed companies on the Shanghai and Shenzhen Stock Exchanges from 2012 to 2023 as a sample to study the impact of Directors' and Officers' Liability Insurance (D&O insurance) on corporate investment efficiency and its varying effects under different governance environments. The empirical results show that purchasing D&O insurance can significantly reduce the absolute value of corporate investment efficiency and enhance the overall investment efficiency of enterprises. Further sub-sample regressions reveal that D&O insurance is negatively correlated with over-investment, indicating that purchasing D&O insurance can significantly curb excessive investment behavior in enterprises. The mediating effect shows that D&O insurance not only directly affects corporate investment efficiency but also indirectly improves it by enhancing information disclosure quality. The results of heterogeneity analysis demonstrate that in a governance environment where board supervision is not lacking and the board's supervision and restraint over managers are effective, the external supervisory role of D&O insurance can be more effectively exerted, and its positive governance effect on investment efficiency is more pronounced.

Suggested Citation

  • Tang, Wenping & Yeung, Chak Ha & Lu, Xiao, 2026. "Directors' and officers' liability insurance, information disclosure and corporate investment efficiency," Finance Research Letters, Elsevier, vol. 88(C).
    • Handle: RePEc:eee:finlet:v:88:y:2026:i:c:s1544612325023323
    DOI: 10.1016/j.frl.2025.109083
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