The Impact of the New Securities Law and Directors’ and Officers’ Liability Insurance on Stock Price Crash Risk : Evidence from China

Key Points

• Evaluate the impact of D&O insurance on stock price crash risk and how the 2020 securities law reform reshapes governance roles.
• Analyzed panel data from Shanghai and Shenzhen A-share listed companies from 2009 to 2023.
• Measured stock price crash risk through negative conditional skewness of weekly stock returns.
• Evaluated changes before and after the 2020 securities law reform.
• Overall, D&O insurance did not significantly reduce stock price crash risk.
• Significant discontinuity in risk reduction observed before and after the 2020 law reform.
• The reform enhanced governance by increasing managerial liability costs and strengthening external oversight.

Abstract