Voluntary versus mandatory disclosure of liability insurance coverage limit
研究了在诉讼风险环境下，企业自愿或强制披露责任保险保额上限的决策，发现诉讼环境弱时自愿披露，强时则可能不披露或只披露高保额，且强制披露能促进现金流信息的自愿披露。
This article analyzes the disclosure of the liability insurance coverage limit and the impact of mandating disclosure of the coverage limit in a setting where voluntary disclosure of a firm’s cash flow information is subject to litigation risk and the firm has directors’ and officers’ (D&O) liability insurance. Disclosure of cash flow information is costly, but disclosure of the insurance coverage limit features no direct disclosure friction. We find that, when the litigation environment is weak, the usual unraveling argument applies, and the manager always voluntarily discloses the coverage limit in equilibrium. However, when the litigation environment is strong, either no coverage limit is disclosed or only sufficiently high coverage limits are disclosed in equilibrium. Further analysis shows that mandatory disclosure of the coverage limit increases the voluntary disclosure of cash flow information.