The Role of Directors’ and Officers’ Insurance in Securities Fraud Class Action Settlements Academic Article uri icon

abstract

  • © 2015 by The University of Chicago. All rights reserved. Because of previous data unavailability, it is unclear how important directors’ and officers’ (D&O) insurance is in securities fraud class action settlements. Using a unique data set of US D&O policies, we find that D&O insurance coverage is a less significant determinant of settlement amounts than estimated damages and proxies for the merits of cases. Limits on D&O insurance are related to settlements in only the weakest cases (those without allegations of accounting violations or institutional lead plaintiffs) where proxies for cases’ merits play a minimal role. Our findings suggest that most securities fraud class action settlements are meritorious and that accounting-related cases are a reasonable proxy for fraud.

author list (cited authors)

  • Donelson, D. C., Hopkins, J. J., & Yust, C. G.

citation count

  • 14

publication date

  • November 2015