Research On The Impact Of D&O Insurance On Total Factor Productivity

China is now accelerating the transformation of economic development,deepening the quality,efficiency and power change.Therefore,in order to achieve sustainable economic growth,how to dig deeper into the endogenous growth momentum of enterprises and enhance the level of total factor productivity has become the key to the current development.From the perspective of micro-enterprise development,the role of directors and executives for the future growth of the company should not be underestimated,so it is particularly important to give full play to the dynamics of executives in corporate governance.The directors’ and officers’ liability insurance,which is characterized by "risk unbundling",has been highly favored by enterprises in recent years driven by the promulgation of the new securities law and several major litigations,and has attracted the attention and discussion of scholars and the society.At present,there are different views in academia regarding the governance effects of directors’ and officers’ liability insurance for listed companies in China.One side believes that it has certain positive effects;the other believes that due to risk unbundling,directors’ and officers’ liability insurance is more likely to induce opportunistic behaviors of director’s executives,which is thus detrimental to corporate governance.In this thesis,we will explore the intrinsic correlation between directors’ and officers’ liability insurance and total factor productivity of firms from the perspective of alleviating information asymmetry.This thesis first reviews domestic and international research literature on the motivation and governance effects of directors’ and officers’ liability insurance,the measurement and impact factors of corporate total factor productivity.This thesis finds that there is a lack of literature directly studying the relationship between directors’ and officers’ liability insurance and corporate total factor productivity and its related impact mechanisms.In view of this,we analyze the theoretical mechanism of directors’ and officers’ liability insurance affecting the total factor productivity of enterprises based on the path of alleviating financing constraints and mitigating agency costs.In the empirical part,this thesis first measures the total factor productivity of the selected sample firms using the LP method and OP method,then establishes a panel model based on the data of A-share listed companies from 2009 to 2021 to empirically analyze the impact of purchasing directors’ and officers’ liability insurance on total factor productivity.We also construct a mediating effect model based on the original model to analyze the possible mediating effects of financing constraints and agency costs between directors’ liability insurance and total factor productivity of enterprises.The findings of this thesis show that,first,there is a significant positive relationship between the purchase of directors’ and officers’ liability insurance and the total factor productivity of firms,and the purchase of directors’ and officers’ liability insurance can increase the total factor productivity of firms measured by LP method and OP method by 0.387 and 0.249,respectively.second,the mechanism analysis shows that directors’ and officers’ liability insurance reduces the information asymmetry within the firm and between it and financial institutions,which not only alleviates the financing constraints of the firm in the external capital market,but also mitigates the agency costs within corporate governance;Third,the heterogeneity analysis shows that the promotion effect of directors’ and officers’ liability insurance on the total factor productivity of enterprises is more obvious in state-owned enterprises,while in the enterprises with the dual and the separation role of the board chairman,the impact of directors’ and officers’ liability insurance on the total factor productivity of enterprises is not significantly different.Therefore,in the critical period of China’s economic transformation,directors’ and officers’ liability insurance should be promoted continuously so that liability insurance products can better serve the real economy and thus promote the highquality development of China’s economy.