The Quest for Talented Independent Directors: The Role of Directors` and Officers` Liability Insurance

Abstract

This study explores whether directors` and officers` liability insurance (D& ; O insurance) is an effective tool in firms` quest for talented independent directors, that is, those who are highly educated, well-connected, or financial experts. We find that firms with D& ; O insurance are better able to recruit talented independent directors, supporting that the protection provided by D& ; O insurance is determinative when talented individuals are deciding whether to join a board. We also show that D& ; O insurance reduces the incidence of independent directors` resignation. Collectively, our evidence suggests that D& ; O insurance helps firms maintain a board with superior competence and greater stability, which also explains the wide prevalence of D& ; O insurance in practice.

本研究探討董監事責任險是否能在公司尋求優秀獨立董事時，作為有效的工具，而優秀獨立董事係指符合下列三條件之一者：（1）具備碩士或以上學歷，或（2）身兼三間或以上之董事職位，或（3）符合財務或會計專業人員資格。本研究發現，「購買董監事責任險」與「優秀獨立董事百分比」為顯著正相關，而「購買董監事責任險」與「獨立董事自願離職」為顯著負相關。整體而言，本研究的實證結果支持董監事責任險有助於公司聘任優秀獨立董事、並維持董事會穩定性，此應亦為董監事責任險持續普及的原因之一。