Board Composition and Firm Value with the Effect of Directors’ & Officers’ Insurance
نویسندگان
چکیده
This paper investigates the relationship between firm value and board composition with consideration of the effects of D&O insurance: monitoring incentive and moral hazard. Based on three measurements of firm value, we find that (1) D&O insurance provides monitoring incentive for the board; (2) firm value is significantly related to board composition and D&O insurance; and (3) the function of D&O insurance varies with firm size and industry type. The results suggest that D&O insurance in general plays a monitoring role for the board and serves as signaling capital and/or risk capital to increase market value of a firm.
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