Directors' and officers' liability insurance and acquisition outcomes

• 成果类型: Article
• 署名作者: Lin, Chen; Officer, Micah S.; Zou, Hong
• 署名单位: Loyola Marymount University; Chinese University of Hong Kong; City University of Hong Kong
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2011.08.004
• 发表日期: 2011
• 页码: 507-525
• 关键词: Directors' and officers' liability insurance; Mergers and Acquisitions

摘要

We examine the effect of directors' and officers' liability insurance (D&O insurance) on the outcomes of merger and acquisition (M&A) decisions. We find that acquirers whose executives have a higher level of D&O insurance coverage experience significantly lower announcement-period abnormal stock returns. Further analyses suggest that acquirers with a higher level of D&O insurance protection tend to pay higher acquisition premiums and their acquisitions appear to exhibit lower synergies. The evidence provides support for the notion that the provision of D&O insurance can induce unintended moral hazard by shielding directors and officers from the discipline of shareholder litigation. (C) 2011 Elsevier B.V. All rights reserved.