| One of the important factors to measure the efficiency of capital market resource allocation is whether asset prices can adequately and timely reflect all available information in the market.Unlike mature capital markets such as the United Kingdom and the United States,China’s capital market started late,the foundation is thin,and the construction of supporting systems is not perfect;and in the current securities trading market in China,stock movements fluctuate with the general industry,and the phenomenon of "the same rise and fall" is very significant,that is,the synchronization of stock prices is high.The stock price cannot fully and truly reflect the actual value of the enterprise,which impress the resource allocation efficiency in the capital market.Although share price synchronization has a great impact on the development of the capital market,the proposition of how to reduce share price synchronization and improve the efficiency of the capital market operation has not received much attention.In recent years,events such as the Luckin Coffee financial fraud case and the first instance verdict of the Kangmei Pharmaceuticals misrepresentation case have brought the system of directors’ and officers’ liability insurance(D&O Insurance)to great attention.The D&O Insurance system will act as the payer of last resort when a lawsuit is filed against a director or supervisor for misconduct in the course of their work,and when their personal wealth is unable to cover the amount of the lawsuit claim and the interests of shareholders are harmed,thus protecting the rights and interests of shareholders to a certain extent.Not only that,the corporate governance function of D&O Insurance is also of great interest.Regarding the governance effects of D&O Insurance,there are currently two completely opposing views in the academia: one part of scholars believes that D&O Insurance not only transfers the practice risk of management,but also introduces insurance companies as third-party supervisors to restrain management’s opportunistic behavior,improve the effectiveness of corporate governance,and alleviate the principal-agent problem.However,another part of scholars,from an opportunistic perspective,believe that the underwriting effect of D&O Insurance will intensify the opportunistic behavior of executives and exacerbate agency conflicts.As an important institutional arrangement of external governance,the governance effect of D&O Insurance is not clear,and an in-depth study of it is still necessary.Using the data of Chinese A-share listed companies from 2010 to 2020 as a sample,this thesis finds that the purchase of D&O Insurance can effectively reduce the synchronization of corporate share prices and improve the allocation efficiency of the capital market compared with those companies that do not purchase D&O Insurance;and on this basis,this thesis finds that the purchase of D&O Insurance can significantly increase the risk-taking ability of companies through mechanism testing,and the higher risk-taking ability will drive the management’s risk-taking ability.The thesis finds that purchasing directors’ and officers’ liability insurance significantly increases the risktaking capacity of firms,and higher risk-taking capacity drives management to make more aggressive decisions,resulting in abnormal performance fluctuations,which in turn reduces stock price synchronization,i.e.,risk-taking plays a mediating role between D&O Insurance and stock price synchronization.Further,the empirical tests on the factors influencing the two factors in specific situations reveal that: firstly,board flatline positively moderate the relationship between D&O Insurance and stock price synchronization,i.e.,board faultline reduce the inhibitory effect of D&O Insurance on stock price synchronization;secondly,corporate governance positively moderates the relationship between D&O Insurance and stock price synchronization,i.e.,the better corporate governance,the more D&O Insurance has a positive effect on stock price synchronization.Finally,market competition plays a positively role in regulating the relationship between D&O Insurance and stock price synchronization,i.e.,the more competitive the market is,the more significant the effect of D&O Insurance on optimizing capital market efficiency.Compared with existing studies,this thesis has certain theoretical value: First,this thesis explores the antecedents of external corporate governance factors on stock price synchronization from the new perspective of D&O Insurance and enriches the research on the factors influencing stock price synchronization by providing corresponding theoretical and empirical evidence.Second,this thesis uses risk-taking as a mediator to examine the impactions of directors’ and fficers’ liability insurance on stock price synchronization,which further expands the understanding of the intrinsic mechanism of the two.Third,this thesis also considers the impact of different contexts on the linkage between D&O Insurance and stock price synchronization from the micro perspective of the board of directors,the meso perspective of the firm and the industry perspective respectively,thus deepening the contextual examination of the role of D&O Insurance on stock price synchronization.The practical value of this thesis is as follows: first,for enterprises,it is advisable to encourage them to reasonably allocate director liability insurance from their own needs,and to promote the improvement of internal and external governance structure of enterprises from multiple perspectives,so as to realize the matching of actual intrinsic value and market value of enterprises.Second,for insurance companies,it helps them to clarify the development of D&O Insurance in China’s capital market and its role mechanism,and provides a theoretical basis for launching D&O Insurance products that are more in line with China’s national conditions and the needs of Chinese enterprises.Third,for the regulators,in the face of the current imperfect legal environment in China,it provides a better mechanism for the development of D&O Insurance protection in line with the Chinese context,so as to better protect the interests of small and medium-sized investors and play the role of D&O Insurance in the capital market under the imminent opening of the full registration system. |
