Directors' and officers' liability insurance and acquirer returns

Directors’ and Officers’ Liability Insurance, Corporate Risk and Risk Taking: New Panel Data Evidence on the Role of Directors’ and Officers’ Liability

In this paper, we develop and estimate models of the determinants of firms’ demand for directors’ and officers’ liability insurance. We add to and validate the existing empirical literature by testing hypotheses regarding the relationship between D&O insurance purchase and firm size, governance characteristics and business risk. Our data set allows us to test both purchase decisions and limits ...

What Went Wrong with Directors' and Officers' Liability Insurance?

Directors’ and officers’ liability insurance and the cost of debt

Using hand-collected data on directors’ and officers’ liability insurance (D&O insurance), we analyze the effect of D&O insurance on the cost of debt. We find that higher levels of D&O insurance coverage are associated with higher at-issue bond yields (to maturity) and higher loan spreads. This evidence suggests that debtholders view D&O insurance coverage as increasing credit risk (potentially...

Directors ’ and Officers ’ Insurance : Ordinary Corporate Expense or Valuable Signaling Device ?

After many years in which directors have used directors’ and officers’ (D&O) coverage to shield themselves from personal responsibility for corporate failure, directors at Enron and WorldCom have been forced to pay $31 million out of their own pockets to settle securities class action lawsuits stemming from two of the largest corporate governance scandals in U.S. history. These settlements have...

Directors’ Insurance and the Expected Cost of Frivolous Litigation when Cross‐Listing into the U.S

We study the expected liability cost of cross‐listing into the United States by examining the change in the structure of a Canadian firm’s directors’ and officers’ liability insurance contract (D&O insurance) before and after cross‐listing. All else being equal, we show that neither the likelihood of having insurance nor the D&O liability insurance coverage change following cross‐list...