Directors and Officers Liability Insurance and Corporate ESG Performance

Abstract

 Driven by both policy initiatives and the need for corporate sustainable development, Directors and Officers Liability Insurance (D&O insurance) has emerged as a key governance tool to balance the long-term value of ESG with short-term interest conflicts. Based on data from Chinese A-share listed companies from 2009 to 2023, this paper empirically examines the impact of D&O insurance on corporate ESG performance and its underlying mechanisms. The study finds: First, purchasing D&O insurance significantly improves corporate ESG performance, and this promotion is achieved by enhancing the quality of environmental information disclosure. Second, heterogeneity analysis shows that the promoting effect of D&O insurance on ESG is more significant in non-high-tech enterprises and state-owned enterprises. The research reveals the governance path through which D&O insurance optimizes corporate ESG practices by strengthening information disclosure, providing theoretical support for ESG risk management and innovations in corporate governance mechanisms.