Directors’ And Officers’ Liability Insurance And Outward Foreign Direct Investment

In recent years,with the deepening of the "Going out" strategy,OFDI has become an effective means for Chinese enterprises to optimize their own industrial structure and explore the international market to obtain more economic benefits.But at the same time,enterprises in the process of foreign direct investment because of the need to deal with the double investment risk of host country and home country,so the higher risk relative to domestic investment,as the maker and the executor of enterprise strategy,directors,supervisors and senior managers of the risks in the process of executing increases and results in the decrease of willingness to make foreign direct investment.D&O,as a new Insurance product aimed at dispersing the performance risk of directors,supervisors and senior managers,may play a positive role in promoting OFDI.In view of this,this paper attempts to analyze the influence of D&O on OFDI and further explore its influence mechanism,in order to provide reference policy suggestions for Chinese enterprises to go international.On the basis of summarizing the research related to the D&O and OFDI,with the help of insurance theory,principal-agent theory and behavioral finance theory,this paper makes a theoretical analysis on the relationship and influence mechanism between the D&O and OFDI and puts forward corresponding hypotheses.Then,the a-share listed companies in Shanghai and Shenzhen from 2009 to 2020 are selected as the research samples,the panel fixed effect model and panel Logit model are used to test the influence of whether the listed companies have the D&O on OFDI with the help of empirical research methods,and prove the robustness of this conclusion.On this basis,the mediating effect model is used to further examine the mechanism of D&O and OFDI.Finally,from the perspective of enterprise heterogeneity,this paper empirically examines the impact of the insurance on OFDI when the property rights,size and growth of enterprises are different.This paper draws the following conclusions through empirical test: First,the D&O has a significant role in promoting OFDI.Second,the D&O promotes OFDI through the dual mechanism of reducing agency cost and improving managers’ confidence.Thirdly,compared with state-owned enterprises,the promotion effect of private enterprises is more significant.Compared with large enterprises,the promotion effect of small and medium-sized enterprises is more significant.Compared with weak growth,the enterprises of strong growth is more significant.According to the conclusions of the empirical research,this paper puts forward policy suggestions for improving the penetration rate of D&O among China’s listed companies and encouraging and supporting OFDI to realize their international development: First,improve the system and regulations related to the D&O,and create a high-quality environment for its benign development.Secondly,we should strengthen the innovation of insurance products and improve the attention and popularity of D&O in China’s capital market on the basis of rational policy formulation.Third,policy preference should be given to private enterprises,small and medium-sized enterprises and enterprises with strong growth potential.Insurance interpretation and premium subsidies should be provided to improve the insurance coverage rate of D&O in the above enterprises,so as to better promote OFDI and realize international development.