기업지배구조가 임원배상책임보험과 보험료에 미치는 효과

Abstract

This study investigates the effects of corporate governance focuses on ownership and board of directors' characteristics on Directors' and Officers' liability insurance (D&O insurance) and D&O premium. First of all, we test the effect of corporate governance on the purchase of D&O insurance, using samples from 2005 to 2007 listed on KOSPI and KOSDAQ. Based on logistic regression, manager-controlled firms, in which controlling owner is not CEO, purchase D&O insurance more than owner-controlled firms, in which controlling owner is CEO, and we document that controlling owner's ownership and CEO's ownership are significantly negatively related to the purchase of D&O insurance. Also, BOD size, ratio and activity of outside directors, and equipment of audit committee are significantly positively related to the purchase of D&O insurance. In control variables, firm size is positively and debt covenant is negatively related to the purchase of D&O insurance. Additionally, we investigate the relationship between D&O premium and corporate governance including variables related to D&O insurance. Among D&O firms, D&O premium increases as agency problem between shareholders and managers, monitoring function of outside directors, future litigation risk and coverage limit of D&O insurance increase. According to the result, we find that the firms in which future litigation risk is high due to the agency problem and the board of directors uses D&O insurance as incentives to monitor managers effectively purchase D&O insurance. Also, these firms among D&O firms pays more D&O premium. This study investigates the relationship between D&O insurance and D&O premium and the various variables of corporate governance and suggests some implications. First of all, we document that firms with high probability of future litigation due to agency problems purchase D&O insurance more than those with low probability of future litigation, and firms which purchase D&O insurance transfer the risk of litigation to insurance companies, so that it is expected that the risk of litigation decrease. Therefore, D&O insurance is the part of agency cost. Secondly, we find that BOD exploits D&O insurance for effective monitoring of managers. BOD with big size, active outside directors, and audit committee exploits D&O insurance to perform the function of monitoring and supervising managers effectively. Therefore, D&O insurance is the part of monitoring cost. Thirdly, among D&O firms, D&O premium increases as agency problem between shareholders and managers, monitoring function of outside directors, future litigation risk and coverage limit of D&O insurance increase. Though this study provides the various implications mentioned above, this paper has some limitations. We hypothesize that the probability of future litigation is positively related to the purchase of D&O insurance. However, it is probable that the probability of future litigation is different from the frequency of actual litigation. Therefor, it would be worthwhile to investigate the relationship between the frequency of actual litigation and the various variables of corporate governance in the future.