Directors' and officers' liability insurance and corporate environmental investment: empirical evidence from the most polluting Chinese listed firms

Purpose This study empirically investigates the impact of directors' and officers' liability insurance on corporate environmental investment. Design/methodology/approach This paper takes A-share listed firms in the most polluting industries from 2013 to 2019 as the research sample. The authors perform multiple regression analysis to examine the research question, and other approaches such as PSM and Heckman two-stage model are applied to test the robustness of the main results. Findings The authors find that D&O insurance insured firms significantly decrease the level of corporate environmental investment. The results keep consistent after alleviating potential endogenous concerns. Further analysis shows that the negative association between D&O insurance and environmental investment is more pronounced in firms facing greater environmental pressure and stronger market supervision, and firms located in regions with a rich legal environment. Research limitations/implications This research extends the literature on the antecedents of corporate environmental investment and the consequences of D&O insurance. Practical implications The study may deepen people's understanding of D&O insurance and inform them of its negative effects. This research sheds light on the potential factor resulting in a relatively low level of corporate environmental investment in China, which has an important policy implication for government to carry out some regulations to make a difference. Originality/value Against the backdrop that more importance has been attached to environmental protection globally, this paper is the first study to examine the impact of D&O insurance on corporate environmental investment in the context of the transitional and emerging market-China.