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Overinvestment, ownership structure, and directors' and officers’ liability insurance

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  • Chiang, Yao-Min
  • Chang, Pang-Ru

Abstract

This study examines the moderator effect of directors' and officers’ liability insurance (D&O insurance) on the relationship between ownership structure and overinvestment. We find that firms with D&O insurance and higher insurance coverage have a higher probability of overinvestment. These results show the D&O insurance is like a moral hazard effect. We also find evidence that the relationship between ownership structure and overinvestment is affected by D&O insurance. As well as the results support that the firms purchasing D&O insurance is moderator effect on ownership structure and overinvestment.

Suggested Citation

  • Chiang, Yao-Min & Chang, Pang-Ru, 2022. "Overinvestment, ownership structure, and directors' and officers’ liability insurance," International Review of Economics & Finance, Elsevier, vol. 78(C), pages 38-50.
    • Handle: RePEc:eee:reveco:v:78:y:2022:i:c:p:38-50
    DOI: 10.1016/j.iref.2021.11.002
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