Associate Professor Kung-Cheng Ho, a researcher of the Base, has published a collaborative paper titled "Confucianism and D&O Insurance Demand of Chinese Listed Companies" in Pacific-Basin Finance Journal.

Abstract:

This study explores the relationship between Confucianism and business ethics and explains the reasons for the low coverage of directors' and officers' (D&O) insurance in emerging markets from the perspective of informal institutions. Using a sample of Chinese listed companies that issued A-shares from 2004 to 2020 and the index of jinshi degree holder density as the proxy variable for Confucianism, we empirically tested the impact of Confucianism on corporate D&O insurance demand. Our results demonstrated that ethical values such as integrity, honesty, and wisdom in Confucianism restrain the D&O insurance market. This result is robust to instrumental variables, propensity score matching, the Heckman two-step regression, and other methods. Our mechanism analysis revealed that corporate risk-taking is an important channel through which Confucianism inhibits the D&O insurance demand of listed companies. Further analysis showed that the external regulatory, legal, and natural environments are important factors affecting the negative correlation between them. The influence of Confucianism on D&O insurance demand is more significant if the corporate executive team lacks foreign experience or exhibits high decision-making myopia. Confucianism has a more significant inhibitory effect on D&O insurance in state-owned enterprises, non-foreign holding companies, and firms with small holdings by institutional investors. Litigation risk significantly enhances the inhibitory effect of Confucianism on D&O insurance.

Keywords:  Confucianism; Moral hazard; Ethics; Directors and officers insurance 

Link: https://doi.org/10.1016/j.pacfin.2023.101996

Teacher profile

Kung-Cheng Ho, Doctor of Taiwan Yuanzhi University, master supervisor of Finance, master supervisor of financial Engineering. His research interest covers Corporate finance, credit risk management, corporate social responsibility, information asymmetry risk and cross-disciplinary research. His research interest is in the Asia-Pacific Journal of Accounting & Economics, Corporate Governance: An International Review, Emerging Markets Review, Energy Economics, International Review of Economics & Finance, International Review of Financial Analysis, Journal of Accounting, Auditing and Finance, Journal of Business Research, Journal of Corporate Finance, Journal of Forecasting, Pacific-Baisn Finance Journal, Review of Quantitative Finance and Accounting and other international SSCI journals published more than 40 articles, including 1 ABS 4-star journals, 12 three-star journals and 17 SSCI first-region journals. In addition, he has preached papers in dozens of important academic conferences at home and abroad. Including China Annual Finance Conference, China Annual Financial Engineering Conference, China Annual Management Conference, CICF, American Accounting Association, Asian Finance Association, European Finance Association, Europe Financial Management Association, Financial Management Association, Taiwan Management Institute, Western Economic Association International, etc. In addition, he has reviewed manuscripts for more than 20 journals at home and abroad, including Asia Pacific Journal of Management, Corporate Governance: An International Review, Economic Modelling, Emerging Markets Finance and Trade, Financial Innovation, Investment Analysts Journal, International Journal of Emerging Markets, International Review of Economics and Finance,  Managerial and Decision Economics, etc.