Under the Korean Commercial Act (Article 400, Paragraph 1), a director's liability to the company may be waived with the consent of all shareholders; however, since obtaining the consent of all shareholders is virtually impossible for large corporations, the need for limiting directors' liability has been raised. Through the amendment of the Commercial Act in April 2011, in addition to the existing waiver of liability with the consent of all shareholders, partial reduction of directors' liability as prescribed by the articles of incorporation was permitted (Article 400, Paragraph 2), which is referred to as the Liability Limitation Provisions (LLP). The legislative intent of the LLP is to reduce the risk associated with directors' failed managerial decisions and to enhance management efficiency. This study examines whether the adoption of LLP mitigates managers' risk-averse attitudes and induces more active management participation. Additionally, since LLP has potentially conflicting effects, we analyze what effects it has on firm value for adopting firms. Furthermore, we examine whether LLP promotes managerial misconduct and increases corporate opacity, using related-party transactions as a proxy to investigate the association with LLP. This study conducted analyses on firms listed on the KOSPI and KOSDAQ markets during the period from 2012 to 2014. The analytical results are as follows: firms that adopted LLP showed increased investment compared to non-adopting firms, but no statistically significant relationship with firm value was found. Meanwhile, in the analysis examining the differential effects of LLP based on firms' investment propensity (investment and firm value), statistically significant positive values were found for underinvesting firms, implying that LLP has a positive effect on underinvesting firms. In the additional analysis, no statistically significant association between LLP and related-party transactions was found. Finally, the analysis comparing pre- and post-adoption periods for firms that adopted LLP showed that investment increased after adoption compared to before, but no significant relationship with firm value was found. This study makes contributions in three main areas. First, although the government introduced provisions for reducing directors' liability through the 2011 amended Commercial Act, no empirical analysis of the provisions' effects has been presented. In this regard, we hope that our findings serve as useful information for corporate stakeholders while examining the effectiveness of the government's policy. Second, this study is significant in that LLP can be utilized as a mechanism to curb managers' risk-averse underinvestment and increase investment. Finally, we hope that this study can partially alleviate the concern that LLP may promote managerial misconduct and increase corporate opacity.