Premium
Does Directors and Officers’ Liability Insurance Induce Bank Risk‐taking? Evidence from Taiwan
Author(s) -
Liao YiPing,
Li KueiFu
Publication year - 2017
Publication title -
asia‐pacific journal of financial studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.375
H-Index - 15
eISSN - 2041-6156
pISSN - 2041-9945
DOI - 10.1111/ajfs.12163
Subject(s) - business , actuarial science , liability insurance , liability , deposit insurance , insurance policy , auto insurance risk selection , financial system , finance
This study investigates the effect of directors and officers’ (D&O) insurance on bank risk‐taking. Using data from Taiwan banks, we find that: (i) the level of D&O insurance coverage is positively associated with risk‐taking; and (ii) this positive relationship is less pronounced for banks whose insurers are highly credit‐rated or specialists in the D&O insurance market. Overall, considering the severe consequences of greater bank risk‐taking, our findings highlight the need for regulators to monitor the use of D&O insurance policies by banks.