Directors' and officers' liability insurance and acquisition outcomes

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

117 Scopus Citations
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Author(s)

  • Chen Lin
  • Micah S. Officer
  • Hong Zou

Related Research Unit(s)

Detail(s)

Original languageEnglish
Pages (from-to)507-525
Journal / PublicationJournal of Financial Economics
Volume102
Issue number3
Publication statusPublished - Dec 2011

Abstract

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. © 2011 Elsevier B.V.

Research Area(s)

  • Directors' and officers' liability insurance, Mergers and acquisitions

Citation Format(s)

Directors' and officers' liability insurance and acquisition outcomes. / Lin, Chen; Officer, Micah S.; Zou, Hong.

In: Journal of Financial Economics, Vol. 102, No. 3, 12.2011, p. 507-525.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review