• Corporate Governance: Directors’ Liability and Board Structure

Abstract

This paper attempts to investigate the effect of directors’ liability on corporate governance and the determinants of the board after the Sarbanes-Oxley Act (SOX). Based on the data of public firms in Taiwan during 2003-2007, the empirical findings suggest that board independence is positively related to Directors’ & Officers’ (D&O) insurance, debt ratio, bargaining power of CEO and high technology industry. Board leadership duality is negatively related to firm size and positively related to high technology industry. The findings also show that board size is positively related to D&O insurance in small firms but unrelated in large firms. The results in general suggest that directors’ liability is an important determinant of board structure and D&O insurance provides monitoring incentive for corporate governance.

Keywords: Corporate Governance, Board Structure, Directors’ Liability, Directors’ and Officers’ Insurance