How Does a Staggered Board Provision Affect Corporate Strategic Change?—Evidence from China’s Listed Companies

Kai Wang, Kun-Kun Xue, Jin-Hua Xu, Chien-Chi Chu, Sang-Bing Tsai, He-Jun Fan, Zhen-Yu Wang and Jiangtao Wang
Additional contact information
Kai Wang: College of Business Administration, Capital University of Economics and Business, Beijing 100070, China
Kun-Kun Xue: China Academy of Corporate Governance, Nankai University, Tianjing 300071, China
Jin-Hua Xu: School of Management, Guangdong University of Technology, Guangzhou 510520, China
Chien-Chi Chu: Department of Finance, Business School, Shantou University, Shantou 515063, China
Sang-Bing Tsai: China Academy of Corporate Governance, Nankai University, Tianjing 300071, China
He-Jun Fan: College of Business Administration, Capital University of Economics and Business, Beijing 100070, China
Zhen-Yu Wang: China Academy of Corporate Governance, Nankai University, Tianjing 300071, China
Jiangtao Wang: Zhongshan Institute, University of Electronic Science and Technology of China, Zhongshan 528402, China

Sustainability, 2018, vol. 10, issue 5, 1-13

Abstract: As China’s capital market has become more and more developed, listed companies have begun to establish some anti-takeover provisions to protect their controlling right. Existing studies have examined the consequences of the establishment of such provisions. However, few studies have explored how these provisions affect corporate strategic change. Based on agency theory and prospect theory, this paper proposes two channels through which one of the anti-takeover provisions, staggered board provision, impacts strategic change. Using the data of China’s listed companies which issue A-shares in Shenzhen and Shanghai stock exchanges from 2007 to 2014, these two channels are tested. We find that the existence of a staggered board provision negatively affects the extent of strategic change. In addition, if governance mechanisms restrict directors’ power, the relationship between staggered board provision and strategic change will be weakened, which supports the agency theory. If the listed company is faced with a more dynamic external environment, the relationship between staggered board provision and strategic change will be stronger, which supports the prospect theory. These results are robust after we use a different method to measure strategic change. Our conclusions not only enrich literature about strategic change and anti-takeover provisions, but also are helpful for improving corporate governance in China and other developing countries.

Keywords: staggered board provision; strategic change; corporate governance; environment dynamism; anti-takeover provision; Ethics in finance; sustainable finance (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.mdpi.com/2071-1050/10/5/1412/pdf (application/pdf)
https://www.mdpi.com/2071-1050/10/5/1412/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:10:y:2018:i:5:p:1412-:d:144348

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().