Directors' and Officers' Liability Insurance and Specific Volatility in Corporate Stock Prices

Directors and Officers Liability Insurance (D&O insurance), as a vital tool for corporate risk management and operational stability, exerts a profound influence on the development of share price volatility. This study employs panel fixed-effects models and instrumental variable methods, utilising data from listed companies between 2004 and 2023, to validate the mediating effect of information transparency. Findings reveal that D&O insurance exerts a positive effect on stock price volatility, a conclusion upheld through multiple robustness tests. From an internal corporate governance perspective, this promotional effect is more pronounced in firms characterised by overlapping board and executive functions, high executive compensation incentives, and concentrated share ownership. Regarding external environmental factors, the promotion of stock price volatility by directors' and officers' liability insurance is more pronounced in firms facing high performance pressure, high media attention, and high marketisation. Mechanism analysis indicates that purchasing directors' and officers' liability insurance enhances stock price volatility by improving corporate information disclosure quality and transparency. This conclusion holds significant implications for regulating the development of directors' and officers' liability insurance business and guiding enterprises to enhance information disclosure efficiency.