Research On The Influence Of Director And Executive Liability Insurance On Commercial Credit Financing

Financing can help enterprises expand their scale,explore new markets,and is closely related to the development and growth of enterprises.However,due to the imperfect laws and regulations in China,the credit records and rating systems of enterprises are not yet sound enough,making it difficult for banks and other financing institutions to make a fair and accurate assessment of enterprise risks.For state-owned enterprises or large-scale enterprises with strong capabilities,they can easily obtain financing funds at lower financing costs,which to some extent inhibits economic development and limits the overall innovation ability of the market.The financing method of commercial credit has to some extent broken through the original financing framework,avoided the unfavorable position brought by ownership advantages and scale advantages,avoided the occurrence of excessive accumulation of resources in individual enterprises,achieved the optimal allocation of market funds,and is conducive to promoting the comprehensive development of China’s financial market.In the actual business process,enterprises need to meet various conditions to obtain commercial credit financing from investors,and the stability of the enterprise’s operation is an important factor that investors will consider.The decision-making mistakes of the enterprise management can cause huge economic losses to the enterprise,causing negative evaluations from the public and even investors.Director’s and Officers’ Liability Insurance(D&O Insurance),as a professional liability insurance,was founded to bear the losses caused by the company’s directors,supervisors,and senior management personnel to the company due to decision-making reasons in the business process,and to bear the excessive risks in their practice process,thus maintaining the stable operation of the enterprise to a certain extent.However,due to the particularity of China’s financial market,there is still some controversy over whether D&O insurance can have an impact on corporate governance and what kind of impact it will have.Therefore,commercial credit financing can be used as a perspective to study the governance effect and opportunism behavior of D&O insurance,which has important theoretical and practical significance for improving corporate governance in China and alleviating the financing problems caused by information asymmetry.Based on the corporate governance view and opportunism view of D&O insurance,this paper takes the data of A-share listed companies in Shanghai and Shenzhen Stock Exchanges in China from 2010 to 2021 as the research sample,explores the path of D&O insurance to commercial credit financing,and tests the robustness of basic regression in a variety of ways.Through the mesomeric effect test,whether the "Big Four" audit(whether the enterprise accepts the audit of the Big Four accounting firms,referred to as the "Big Four" audit)plays an intermediary role in the impact of D&O insurance on commercial credit financing,and use the heterogeneity test to further explore the impact of D&O insurance on commercial credit financing under different enterprise characteristics.Research has found that companies subscribing to D&O insurance can help improve the level of commercial credit financing,and the "Big Four" audits play a partial intermediary role in it;Through further research,it was found that the purchase of D&O insurance by companies with dual roles in one has a more significant impact on commercial credit financing;For enterprises with a high degree of concentration ratio of authority,the subscription of directors’ and executives’ liability insurance is more conducive to improving the level of commercial credit financing;Compared to state-owned enterprises,non-state-owned enterprises’ subscription to D&O insurance has a greater impact on improving the level of commercial credit financing.After robustness test,the results are also consistent with it.In summary,based on the research findings of this article,D&O insurance has incentive and external supervision effects on corporate governance,which helps enterprises obtain more commercial credit financing.Based on the above conclusions,this article believes that enterprises should attach importance to the incentive and external supervision functions of D&O insurance,and actively subscribe to D&O insurance;Secondly,we should promote the construction of the internal environment of the enterprise and provide a good regulatory environment for management decision-making;Finally,we should attach importance to the role of external auditing and improve the quality of auditing.