摘要
This study examines the relationship between directors' and officers' (D＆O) liability insurance and operational risk in Taiwan's banking industry from 2006 to 2021. Using a sample of 398 operational loss events, we find that higher D＆O insurance coverage is positively associated with greater operational risk, supporting the moral hazard hypothesis. Moreover, this positive association is significantly weakened when the shareholding ratio of directors is higher, suggesting that internal governance mechanisms can mitigate the risk-inducing incentives created by insurance protection. These findings offer important implications for regulatory policy and the design of D＆O insurance in the financial sector.