Accounting Papers

Document Type

Journal Article

Date of this Version

2000

Publication Source

The Journal of Law, Economics, & Organization

Volume

16

Issue

2

Start Page

449

Last Page

477

DOI

10.1093/jleo/16.2.449

Abstract

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.

Copyright/Permission Statement

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

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Date Posted: 27 November 2017

This document has been peer reviewed.