This article investigates the effect of a firm's adoption of director liability reduction coverage laws on their directors’ bad news hoarding behavior. Using unique Korean institutional settings, we find that, compared to directors of noncovered firms, those of covered firms are more likely to withhold negative information, proxied by stock price crash risk measures. Our regression analysis implies that legal protections of a company through DLR coverage makes directors relatively relaxed about litigation risks, which induces them to take advantage of the laws. Furthermore, we find that the relation manifests when the firm is owned by a high proportion of foreign investors, covered by many financial analysts, and is less regulated by listed exchange.

中文翻译：

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董事责任减少和股价崩盘风险：来自韩国的证据

本文调查了公司采用减少董事责任保险的法律对其董事的坏消息囤积行为的影响。使用独特的韩国制度设置，我们发现，与非涵盖公司的董事相比，涵盖公司的董事更有可能隐瞒负面信息，以股价崩盘风险指标为代表。我们的回归分析表明，通过 DLR 覆盖对公司的法律保护使董事对诉讼风险相对放松，这促使他们利用法律。此外，我们发现，当公司由高比例的外国投资者拥有，被许多金融分析师覆盖，并且受到上市交易所的监管较少时，这种关系就会显现出来。