DIRECTORS� AND OFFICERS� LIABILITY INSURANCE AND COST OF DEBT

ABSTRACT In this paper we explore the link between directors’ and officers’ liability insurance and cost of debt in Taiwanese firms. We find that firms with directors’ liability insurance have higher cost of debt than firms without such insurance. The positive association between directors’ liability insurance and cost of debt remains both statistically and economically significant after controlling for a set of important determinants on cost of debt, as well as endogeneity of D&O insurance. We also find that cost of debt decreases with institution ownership. board size, board independence and growth opportunities. Keywords D&O Insurance, Cost of Debt, Corporate Governance, Board