Research On The Influence Of Directors And Executives Liability Insurance On Corporate Financialization

The management’s self-interested behavior caused by the principal-agent conflict intensifies the financialization of enterprises.The management obtains excess profits through the allocation of financial assets,increases performance compensation,maximizes its own interests,and intensifies the financialization of enterprises.The financialization behavior of enterprises deviates from the development of the main business,diverts physical investment resources,makes insufficient investment in research and development,leads to the decline of the core competitiveness of the main business,and damages the sustainable development of enterprises.As an external governance mechanism,director and executive liability insurance can encourage management to increase investment in R&D and inhibit corporate financialization by supervising the decisions of corporate business.The institutional environment is the foundation of corporate governance.The property rights system is a unique internal institutional environment of Chinese enterprises,and differences in property rights affect management decision-making;the level of marketization,as an external institutional environment,can provide legal protection for the external governance role of directors and executives liability insurance.Therefore,it is necessary to study the impact of director and senior management liability insurance on corporate financialization,and to analyze the differences in the role of director and senior management liability insurance on corporate financialization governance under different property rights and marketization levels.This paper takes the A-share non-financial listed companies in China’s Shanghai and Shenzhen stock exchanges from 2007 to 2020 as the research sample,mainly studies the impact of directors and executives liability insurance on corporate financialization,and further examines the nature of property rights and marketization level on directors and executives.The impact of liability insurance on the relationship between corporate financialization.The research finds that: Firstly,the director and executive liability insurance,by exerting the supervision and incentive effect,improves the total asset turnover efficiency,reduces the agency cost,and increases the R&D investment of the main business,thereby inhibiting the financialization of enterprises.Secondly,the internal supervision and incentives of state-owned enterprises are insufficient,and holding surplus funds makes management more motivation to implement financialization behaviors.In order to reduce underwriting risks,directors and executives liability insurance underwriting companies will increase supervision and restrain the financialization of state-owned enterprises;in regions with a high level of marketization,active market competition and perfect rule of law construction are the directors and executives liability insurance system.The development of the company provides a favorable market environment,enabling it to play a stronger role in external governance and inhibit corporate financialization.This paper explores the governance role of corporate financialization from the perspective of directors and executives liability insurance,enriches the literature on corporate financialization governance,and provides a new perspective for research in this field.The differences in the role of insurance external governance enrich the literature on the governance effect of directors and executives liability insurance.The research in this paper will help regulators to improve the basic system and information disclosure system of director and senior management liability insurance,and expand the promotion of this insurance in China;it will help government departments to improve the reform of state-owned enterprises,by introducing director and senior management liability insurance as an external governance mechanism to improve the corporate governance level of state-owned enterprises;it is helpful for government departments to promote the level of marketization,and by promoting the development of intermediary organizations and improving the construction of legal systems,it provides an environment with transparent information and a sound rule of law for directors and executives liability insurance to play a governance role.