Litigation Risk, Judicial Transparency and Directors’ and Officers’ Liability Insurance

Abstract

Using a sample of listed companies in China from 2009 to 2014, this paper investigates relation between litigation risk and the directors’ and officers’ liability insurance (D&O insurance). The research results show that the higher the risk of litigation, the stronger motivation of the company to buy the D&O insurance, and the judicial transparency has positive moderating effect on the above relationship. It is found that the demand of D&O is influenced by the previous company’s litigation risk and the continuous purchase of the D&O insurance could be promoted by the company's litigation. Our study enriched the D&O insurance demand motive theory, the research conclusion for the D&O insurance in the development of our country and popularity to provide policy and suggestions for reference.