DIRECTORS’ AND OFFICERS’ INSURANCE IN CANADA

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Abstract

This paper looks at the insurance demand of a firm’s directors and officers using a sample of Canadian corporations (excluding firms from the financial services and mining sectors) from 1993-1999. More to the point, we study the demand for directors’ and officers’ insurance. Contrary to the financial distress theory of hedging, our results suggest that larger corporations are more likely to purchase D&O insurance. On the other hand, insurance is more likely when the firm is financially weak. Firms are also more likely to purchase D&O insurance when there are few outsiders on the board of directors and when the board members have an important financial stake in the corporation, suggesting that D&O insurance is yet another tool for managerial entrenchment. Surprisingly, being listed on a stock exchange in the United States does not seem to have an impact on the demand for D&O insurance, contrary to previous results.

Keywords: Executive Compensation, Directors’ and Officer’s Insurance, Litigation

How to cite this paper: Boyer, M. M. (2007). Directors’ and officers’ insurance in Canada. Corporate Ownership & Control, 4(4), 154-159. https://doi.org/10.22495/cocv4i4p13