부산대학교 도서관

China introduced directors and officers liability insurance in 2002, but unlike other advanced countries, the number of listed companies that have purchased this insurance is still lacking. Recently, the demand for directors and officers liability insurance has increased due to the official implementation of the New Securities Law of The People’s Republic China and the Kangmei Pharmaceutical lawsuit, and the number of listed companies that have purchased this insurance is increased rapidly. Therefore, an empirical study on the impact of directors and officers liability insurance on companies is also needed. This study empirically found the effect of directors and officers liability insurance on accounting conservatism in the Chinese capital market. Companies listed on the Shanghai and Shenzhen Stock Exchanges from 2009 to 2021 were selected for the study. As a result of examining the relationship between the conservatism (C-Score) measured by using the methodology of Khan & Watts (2009) and the purchase of directors and officers liability insurance, the results show that the introduction of directors and officers liability insurance may strengthens the incentives for opportunistic behavior of the management. It has been proven that it is possible to lower the level of accounting conservatism by adopting aggressive financial policies. Because of the characteristics of firms, these results were found mainly in non-state-owned enterprises rather than state-owned enterprises. Although this study has limitations in using various measurement methods due to limitations in data collection, the number of listed companies that have recently purchased directors and officers liability insurance has rapidly increased. It is meaningful to suggest that it does not have a positive effect. In the future, as the laws and regulations for directors and officers liability insurance is improved, it is expected that more measurement methods will be used to study the impact of directors and officers liability insurance on the Chinese capital market.