D&O liability insurance and CSR engagement

A publication titled “Care or fear? The link between D&O liability insurance and CSR engagement: Evidence from China” on Pacific Basin Finance Journal by George Wu and co-authors in September 2025

Abstract

We examine the relationship between firms’ purchasing of Directors’ and Officers’ (D&O) liability insurance and corporate social responsibility (CSR) engagement in China from 2009 to 2019. We find that firms with D&O insurance exhibit significantly higher engagement in CSR activities. The main finding remains significant when we employ 2SLS and PSM-DiD approaches to address potential endogeneity concerns. The mechanism tests reveal that the main finding is driven by the reduction of financial constraints facilitated by D&O insurance, although this positive effect can be weakened by the overinvestment restrictions associated with D&O insurance. Finally, the positive effect of purchasing D&O insurance on firms’ CSR engagement is more pronounced for firms with high risk-taking behaviours, high levels of digital innovation, non-SOEs, and firms located in highly developed regions.