controlling-minority shareholder incentive conflicts and.pdf

Title Controlling-minority shareholder incentive conflicts and directors and officers liability insurance: Evidence from China Author(s) Zou, H; Wong, S; Shum, C; Xiong, J; Yan, J Citation Journal Of Banking And Finance, 2008, v. 32 n. 12, p. 2636-2645 Issued Date 2008 URL /10722/188458 Rights Creative Commons: Attribution 3.0 Hong Kong License Controlling-minority shareholder incentive conflicts and directors’ and officers’ liability insurance: Evidence from China a* b b c d Hong Zou , Sonia Wong , Clement Shum , Jun Xiong and Jun Yan aDepartment of Economics and Finance, City University of Hong Kong, Hong Kong bDepartment of Finance and Insurance, Lingnan University, Hong Kong cSchool of Law, City University of Hong Kong dPing An Insurance, China This version: 28 May 2008 Accepted by Journal of Banking and Finance __________________________________________________________________________ Abstract This paper examines the demand for directors’ and officers’ liability insurance (DO insurance) by Chinese listed companies where controlling-minority shareholder incentive conflicts are acute due to the concentrated and split ownership structure. We hypothesize and find evidence that the incidence of seeking DO insurance is positively related to the extent of controlling-minority shareholder incentive conflicts – a finding not previously documented in the literature. Using an event study, we find that the announcements of DO insurance decisions in firms that engage in earnings management, and/or are controlle