Journal of Risk & Insurance · 1997 · 95 citations · 0 references
ManagementCorporate GovernanceInsuranceAgency TheoryCapital StructureCorporate FinanceBoard GovernanceBoard OversightBoard RolesBoard StructureCorporate Governance MechanismsOwnership StructureBoard CharacteristicsBoard Composition EffectsBoard Governance EffectivenessBoard Monitoring Of ManagementBoard Monitoring RoleManagement OwnershipOwnership Structure EffectsShareholder Oversight
Holderness (1990) suggests that directors' and officers' (D&O) insurance plays an important governance role in publicly owned companies. The study empirically tests Holderness's monitoring hypothesis by examining how board composition, managerial ownership, and external shareholder control relate to D&O insurance purchases among 366 UK firms. Using a cross‑sectional analysis of 366 UK companies, the authors evaluate the association between board composition, managerial ownership, external shareholder control, and D&O insurance acquisition. The findings support the monitoring hypothesis, indicating that large firms use D&O insurance and outside directors to monitor managers when external ownership monitoring is costly, while smaller firms rely more on internal and external ownership and less on D&O insurance.
Holderness (1990) suggests that directors' and officers' (D&O) insurance has an important governance role in publicly owned companies. This article empirically tests Holderness's monitoring hypothesis by examining the association between board composition, managerial ownership, external shareholder control, and the purchase of D&O insurance for a sample of 366 companies in the United Kingdom. The results generally support the monitoring hypothesis. In large companies, where monitoring through external ownership is costly, D&O insurance and outside directors are utilized to monitor managers. In smaller companies, monitoring is more likely to be undertaken through internal and external ownership with less reliance on D&O insurance.