Hererogeneous beliefs and the demand for D&O insurance by listed companies

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Título: Hererogeneous beliefs and the demand for D&O insurance by listed companies / Peter Egger, Doina Radulescu, Ray Rees

Autor: Egger, Peter

Notas: Sumario: This article introduces a new rationale for the existence of directors' and officers (D&O) insurance. We use a model with volatile stock markets where shareholders design compensation schemes that incentivize managers to stimulate short-term increases in stock prices that do not maximize longrun stock market value.We show that D&O insurance provides a convenient instrument for the initial shareholders of a company to take advantage of differences in beliefs between insiders and outsiders in capital markets. The empirical results support the idea that both the insurance coverage and the premium are higher in the presence of new shareholders and volatile markets. The results prove robust in various empirical model specifications.

Autores secundarios: Radulescu, Doina
Rees, Ray

Otras clasificaciones: 332

Derechos: In Copyright (InC): http://rightsstatements.org/vocab/InC/1.0/