Page 210 - 臺大管理論叢第32卷第2期

Directors’ and Officers’ Liability Insurance and Corporate Social Responsibility

Tang, 2019; Liao, Shan, and Gao, 2021) and stock price crash risk (Yuan, Sun, and Cao,
2016), etc., this study proposes and obtains the supporting evidence of positive relationship
between the degree of DOLI coverage and the firm’s CSR performance, revealing that
firms paying greater attention to the litigation risk tend to take more into account the

interests of the firm’s stakeholders. Moreover, the engagement of reducing litigation risks
further strengthens stakeholders’ management toward sustainability.
Second, most of the existing research on determinants of a firm’s CSR performance

explores how external and internal factors affect a firm’s CSR performance, such as
the firm’s legal origin, the degree of openness, firm size and profitability (Liang and
Renneboog, 2017; Kim, Kim, Kim, and Park, 2019), (foreign) institutional investor
shareholdings (Dyck, Lins, Roth, and Wagner, 2019; Nofsinger, Sulaeman, and Varma,
2019; Li, Wang, and Wu, 2021), peers social responsibility performance (Cao, Liang,

and Zhan, 2019), family control (El Ghoul, Guedhami, Wang, and Kwok, 2016), degree
of competition (Flammer, 2015; Lee, Byun, and Park, 2018), cross-listing of the firm’s
securities (Boubakri, El Ghoul, Wang, and Kwok, 2016) and other factors. On the other

hand, this research proves that a firm’s emphasis on litigation risks positively affect its
engagement in stakeholders’ management. Namely, DOLI acts as a positive determinant of
CSR performance. Our study not only reduces the concern that DOLI may lead to moral
hazard of managerial personnel and to the conflict of interest between the management
and other stakeholders, the evidence also indirectly confirms that from the perspective of

insurance, CSR acts as a risk management strategy as DOLI (Godfrey, 2005; Koh, Qian,
and Wang, 2014; Minor and Morgan, 2011; Shiu and Yang, 2017). It is our suggestion that
while increasing the coverage of DOLI help firms reduce litigation risk for directors and

the management, these firms can also put greater resource on CSR to reduce potential risks
from its stakeholders.

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