Date of this Version
The Journal of Law, Economics, & Organization
Using a sample of directors' and officers' (D & O) premiums gathered from the proxy statements of Canadian companies, this article examines the D & O premium as a measure of ex ante litigation risk. I find a significant association between D & O premiums and variables that proxy for the quality of firms' governance structures. The association between the proxies for governance structure quality and D & O premiums is robust to a number of alternative specifications. This article provides confirmatory evidence that the D & O premium reflects the quality of the firm's corporate governance by showing that measures of weak governance implied by the D & O premium are positively related to excess CEO compensation. The overall results suggest that D & O premiums contain useful information about the quality of firms' governance.
This is a pre-copyedited, author-produced PDF of an article accepted for publication in The Journal of Law, Economics, & Organization following peer review. The version of record is available online at: http://dx.doi....jleo/16.2.449
Core, J. (2000). The Directors' and Officers' Insurance Premium: An Outside Assessment of the Quality of Corporate Governance. The Journal of Law, Economics, & Organization, 16 (2), 449-477. http://dx.doi.org/10.1093/jleo/16.2.449
Date Posted: 27 November 2017
This document has been peer reviewed.