Directors’ and Officers’ Liability Insurance and the Cost of Equity: The Role of Product Market Competition

• Main Authors: LIN, PEI-YING, 林佩穎
• Other Authors: LU, CHENG-SHOU
• Format: Others
• Language: zh-TW
• Published: 2019
• Online Access: http://ndltd.ncl.edu.tw/handle/6dakb5

碩士 === 國立高雄科技大學 === 財富與稅務管理系 === 107 === The sample includes the public listed firms ranging from 2009 to 2017 in Taiwan. This thesis examines the relationship between D&O insurance and the cost of equity capital, and explores whether product market competition can influence the relationship between D&O insurance and the cost of equity capital. The empirical results indicate as follows：First, D&O insurance is significantly positive related to the cost of equity capital indicating that D&O insurance can induce moral hazard problem of managers and have a higher cost of equity capital. Second, product market competition can mitigate the negative impact of D&O insurance. As the higher degree of industry competition can control managers to do an over-investment decision, and decrease the cost of equity capital from D&O insurance. As the empirical results of this thesis support that the negative effect of D&O insurance is greater than the positive one. Therefore, I suggest that government agencies can carefully consider whether compulsory D&O insurance is a good policy for the companies and strengthen the systems of corporate governance.