- Volume 15 Issue 1
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The Strategic Financial Reporting: Evidence from Directors' and Officers' Liability Insurance
전략적 재무보고: 임원배상책임보험제도를 이용한 연구
- Choi, Jeong-mi (Dept. of Accounting, Cheongju University)
- 최정미 (청주대학교 경상대학 회계학과)
- Received : 2016.04.26
- Accepted : 2017.01.20
- Published : 2017.01.28
This study investigates the association between financial reporting strategy and the directors' and officers' liability insurance. Since D&O insurance protects officers and directors against the risks of shareholder litigation, it is possible that, because of moral hazard, managers will be more willing to participate in opportunistic financial reporting such as earnings manipulation when they are covered by a generous D&O insurance policy. This paper examines the association between D&O insurance and financial reporting, specifically whether the purchase of D&O insurance affects earnings manipulation. On the other side, the firms engage earnings management are willing to purchase D&O insurance, this study tests whether earnings manipulation affects D&O purchases using listed firms in Korean stock market from 2006 to 2008. This paper finds that firms with higher discretionary accruals are less likely to purchase D&O insurance implies that managers who are participating in earnings manipulation are not willing to purchase D&O insurance. The relation between discretionary accruals and D&O is significantly negative which indicate D&O insurance purchase does not trigger earnings manipulation rather it alleviates opportunistic reporting behavior.
Earnings manipulation;D&O insurance;Strategic financial reporting;Reporting quality;Litigation risk
Supported by : 청주대학교
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