Corporate Governance and Executive Compensation: Insurance and Risk Management – The Case of China

At this critical time in the development of financial systems in many parts of the emerging world, Professor Mike Adams and his co-authors offer an interesting insight into the role of corporate insurance in China and the effect this is having on corporate governance, risk management and executive compensation. The link between corporate governance and risk management has hitherto been largely explored through reference to derivatives data. Prof Adams’ work is important as it extends the analysis, using comprehensive data from China,  to consider the use of the purchase of corporate insurance in the delivery of better governance and risk management. His paper also demonstrates the empirical linkages between external accounting, product market and board composition. China is an interesting case study since insurance is the major commercial risk management tool (as the market for other hedging techniques, eg derivatives is not well developed), and of course China is a major destination for FDI flows, so governance issues are of widespread importance to many interested parties. Hence, Professor Adams’ talk and study was of relevance both for those with both an interest in risk management techniques and compensation as well as  governance issues in the emerging world.

 

 

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