LAUSR

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.