Table IV 2SLS regression analysis of the...

Table IV

2SLS regression analysis of the effect of D&O insurance coverage on crash risk

	Model 1		Model 2
Variables	Coefficient	z-value	Coefficient	z-value
Constant	−3.0878	−11.12***	−1.5305	−10.82***
$L N D \hat{O} M$	−0.0190	−2.07**	−0.0115	−2.44**
NCSK1	0.0566	3.86***
DUV1			0.0624	4.07***
DTurn	−1.2042	−1.10	−0.3646	−0.67
RET	13.3183	2.59***	6.2242	2.43**
MTB	0.0153	3.09***	0.0084	3.50***
SIZE	0.1266	9.45***	0.0635	9.22***
SIGMAR	0.8975	1.16	0.0802	0.21
LEV	−0.1660	−1.47	−0.1188	−2.07**
ROA	−0.1929	−1.39	−0.0898	−1.32
ASACC	−0.0453	−0.78	−0.0090	−0.39
Industry Fixed Effect	Yes		Yes
Year Fixed Effect	Yes		Yes
N	4,890		4,890
R²	0.0946		0.1039

	Model 1		Model 2
Variables	Coefficient	z-value	Coefficient	z-value
Constant	−3.0878	−11.12***	−1.5305	−10.82***
$L N D \hat{O} M$	−0.0190	−2.07**	−0.0115	−2.44**
NCSK1	0.0566	3.86***
DUV1			0.0624	4.07***
DTurn	−1.2042	−1.10	−0.3646	−0.67
RET	13.3183	2.59***	6.2242	2.43**
MTB	0.0153	3.09***	0.0084	3.50***
SIZE	0.1266	9.45***	0.0635	9.22***
SIGMAR	0.8975	1.16	0.0802	0.21
LEV	−0.1660	−1.47	−0.1188	−2.07**
ROA	−0.1929	−1.39	−0.0898	−1.32
ASACC	−0.0453	−0.78	−0.0090	−0.39
Industry Fixed Effect	Yes		Yes
Year Fixed Effect	Yes		Yes
N	4,890		4,890
R²	0.0946		0.1039

Notes: The table presents the 2SLS results of the effect of D&O insurance coverage on stock price crash risk. Dependent variables: NCSK and DUV are the crash risk measures of firm i in year t in Models 1 and 2, respectively. Independent variables: $L N D \hat{O} M$ is the predicted LNDOM of Equation (5) of firm i in year t−1. NCSK1 is the crash risk measure of firm i in year t−1. DUV1 is the crash risk measure of firm i in year t−1. DTurn is the change in monthly share turnover of firm i in year t−1. RET is the average firm-specific weekly return of firm i in year t−1. MTB is the market-to-book-value ratio of firm i in year t−1. SIZE is the natural logarithm of the market value of equity of firm i in year t−1. SIGMAR is calculated as the standard deviation of the firm-specific weekly returns of firm i in year t−1. LEV is calculated as the total long-term debt to total asset ratio of firm i in year t−1. ROA is the return on assets of firm i in year t−1. ABACC is the absolute value of the abnormal accruals of firm i in year t−1. Year Fixed Effect is a set of year dummy variables. Industry Fixed Effect is a set of industrial dummy variables. This study applies the Arellano and Bond’s (1991) approach to obtain robust standard errors and then computes the z-values. **,***Significant at the 5 and 1 percent levels, respectively

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