Does Government Decentralization Inspire the Purchase of Directors’ and Officers’ Liability Insurance in State-owned Enterprises?

Abstract

Abstract: Based on a sample of Chinese state-owned companies from 2007 to 2022, this paper studies the effect of government decentralization on directors’ and officers’ liability insurance purchase decision in state-owned enterprises and the moderating effect of industry competition and social trust. The results show: government decentralization reduces government protection, promotes market-oriented operation and risk-taking in state-owned enterprises, and in turn motivates state-owned enterprises to purchase D&O insurance. The incentive effect is restricted by industry competition and social trust atmosphere. Industry competition enhances the promotion effect, while social trust negatively moderates the relationship. In addition, this study also finds that government decentralization promotes risk taking and innovation, thereby promoting the purchase decision of D&O insurance. This paper introduces government decentralization into the study of the purchase decision of D&O insurance, enriches and expands the research on the affecting factors of the purchase decision of D&O insurance and the economic consequences of government decentralization, and provides a new explanation for the reality of the low use of D&O insurance in China’s transitional economy.

Key words: government decentralization, D&O insurance, industry competition, social trust

Su Kun, Fan Yixuan. Does Government Decentralization Inspire the Purchase of Directors’ and Officers’ Liability Insurance in State-owned Enterprises?[J]. Management Review, 2025, 37(6): 3-14.

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