The effect of directors' and officers' liability insurance on tunneling: Evidence from China
Publication Date
6-21-2026
Description
This study examines the effect of Directors' and Officers' Liability Insurance (D&O insurance) on corporate tunneling activities, a typical agency problem. Using the universe of Chinese publicly-traded companies from 2003 to 2020, we find lower growth of tunneling activities within firms whose managers are covered by D&O insurance. The results remain robust after addressing endogeneity concerns and using alternative measures. In addition, the effect of D&O insurance is stronger when firms have better access to insurance providers and when tunneling activities are more likely to occur. Moreover, when tunneling is controlled, D&O insurance is found to promote operating performance. Overall, the results indicate that D&O insurance can function as an effective governance component.
Document Type
Article
Format
Size or Duration
28 pages
Identifier
1098-1616 (ISSN)
DOI
https://doi-org.stmarytx.idm.oclc.org/10.1111/rmir.70040
Digital Publisher
Wiley Online Library
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.
Date accessioned
July 13th, 2026
Recommended Citation
Meng, Q., Sommer, D., Wang, S., & Zhong, Z. (2026). The effect of directors' and officers' liability insurance on tunneling: Evidence from China. Risk Management and Insurance Review, 29, 198–226. https://doi-org.stmarytx.idm.oclc.org/10.1111/rmir.70040