Directors' and officers' liability insurance and carbon emissions

As climate-related issues become more serious, companies face mounting pressure to promote environmental governance. In this study, we examine companies' carbon emissions behavior from the perspective of corporate risk-taking. Analyzing China's company-level carbon emissions data from 2011 to 2021, we find that firms with directors' and officers' liability insurance (D&O insurance) have higher carbon emissions intensity. We then find that the D&O insurance-carbon emissions relationship exists among firms not involved in litigation in the previous year. Furthermore, this relationship becomes more pronounced when companies are under financial distress or have a higher number of analysts following them. Our results support the argument that companies with high risk-taking capacity exhibit greater polluting behavior.