File Download
Links for fulltext
(May Require Subscription)
- Publisher Website: 10.1016/j.jfineco.2013.04.005
- Scopus: eid_2-s2.0-84883271310
- WOS: WOS:000324723600003
- Find via
Supplementary
- Citations:
- Appears in Collections:
Article: Directors' and officers' liability insurance and loan spreads
Title | Directors' and officers' liability insurance and loan spreads |
---|---|
Authors | |
Keywords | Cost Of Debt Financing Credit Risk Directors' And Officers' Liability Insurance Loan Spreads |
Issue Date | 2013 |
Publisher | Elsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jfec |
Citation | Journal Of Financial Economics, 2013, v. 110 n. 1, p. 37-60 How to Cite? |
Abstract | We analyze the effect of directors' and officers' liability insurance (D&O insurance) on the spreads charged on bank loans. We find that higher levels of D&O insurance coverage are associated with higher loan spreads and that this relation depends on loan characteristics in economically sensible ways and is attenuated by monitoring mechanisms. This association between loan spreads and D&O insurance coverage is robust to controlling for endogeneity (because both could be related to firm risk). Our evidence suggests that lenders view D&O insurance coverage as increasing credit risk (potentially via moral hazard or information asymmetry). Further analyses show that higher levels of D&O insurance coverage are associated with greater risk taking and higher probabilities of financial restatement due to aggressive financial reporting. While greater use of D&O insurance increases the cost of debt, we find some evidence that D&O insurance coverage appears to improve the value of large increases in capital expenditure for firms with better internal and external governance. © 2013. |
Persistent Identifier | http://hdl.handle.net/10722/188474 |
ISSN | 2023 Impact Factor: 10.4 2023 SCImago Journal Rankings: 13.655 |
SSRN | |
ISI Accession Number ID | |
Grants |
DC Field | Value | Language |
---|---|---|
dc.contributor.author | Lin, C | en_US |
dc.contributor.author | Officer, MS | en_US |
dc.contributor.author | Wang, R | en_US |
dc.contributor.author | Zou, H | en_US |
dc.date.accessioned | 2013-09-03T04:07:48Z | - |
dc.date.available | 2013-09-03T04:07:48Z | - |
dc.date.issued | 2013 | en_US |
dc.identifier.citation | Journal Of Financial Economics, 2013, v. 110 n. 1, p. 37-60 | en_US |
dc.identifier.issn | 0304-405X | en_US |
dc.identifier.uri | http://hdl.handle.net/10722/188474 | - |
dc.description.abstract | We analyze the effect of directors' and officers' liability insurance (D&O insurance) on the spreads charged on bank loans. We find that higher levels of D&O insurance coverage are associated with higher loan spreads and that this relation depends on loan characteristics in economically sensible ways and is attenuated by monitoring mechanisms. This association between loan spreads and D&O insurance coverage is robust to controlling for endogeneity (because both could be related to firm risk). Our evidence suggests that lenders view D&O insurance coverage as increasing credit risk (potentially via moral hazard or information asymmetry). Further analyses show that higher levels of D&O insurance coverage are associated with greater risk taking and higher probabilities of financial restatement due to aggressive financial reporting. While greater use of D&O insurance increases the cost of debt, we find some evidence that D&O insurance coverage appears to improve the value of large increases in capital expenditure for firms with better internal and external governance. © 2013. | en_US |
dc.language | eng | en_US |
dc.publisher | Elsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jfec | en_US |
dc.relation.ispartof | Journal of Financial Economics | en_US |
dc.rights | This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. | - |
dc.rights | NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Financial Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in PUBLICATION, [VOL 110, ISSUE 1, (2013)] DOI 10.1016/j.jfineco.2013.04.005 | - |
dc.subject | Cost Of Debt Financing | en_US |
dc.subject | Credit Risk | en_US |
dc.subject | Directors' And Officers' Liability Insurance | en_US |
dc.subject | Loan Spreads | en_US |
dc.title | Directors' and officers' liability insurance and loan spreads | en_US |
dc.type | Article | en_US |
dc.identifier.email | Zou, H: hongzou@hku.hk | en_US |
dc.identifier.authority | Zou, H=rp01800 | en_US |
dc.description.nature | postprint | en_US |
dc.identifier.doi | 10.1016/j.jfineco.2013.04.005 | en_US |
dc.identifier.scopus | eid_2-s2.0-84883271310 | en_US |
dc.identifier.hkuros | 232942 | - |
dc.identifier.isi | WOS:000324723600003 | - |
dc.publisher.place | Netherlands | en_US |
dc.identifier.ssrn | 1865679 | - |
dc.relation.project | Enhancing Hong Kong's Future as a Leading International Financial Centre | - |
dc.identifier.scopusauthorid | Lin, C=25630694300 | en_US |
dc.identifier.scopusauthorid | Officer, MS=6507728699 | en_US |
dc.identifier.scopusauthorid | Wang, R=55766209700 | en_US |
dc.identifier.scopusauthorid | Zou, H=48663306300 | en_US |
dc.identifier.issnl | 0304-405X | - |