Anti-Takeover Provision,Takeover Activity And Debt Financing

Since the revision of the "Measures for the Management of the Acquisition of Listed Companies" and the reform of the equity division structure in 2006,the merge and acquisition market in China has become active and the hostile takeovers have become more frequent.In 2015,the "Bao Wan Debate" incident had pushed the controversy of hostile takeovers to a climax.A host of hostile takeover events led to increased awareness of listed companies about the threat of control changes.Some of these companies have successively amended the articles of incorporation and added anti-takeover provisions to improve the corporate governance system to resist hostile takeovers.The addition of anti-takeover provisions not only reduces the probability of companies being acquired,but also may affect the interests of corporate stakeholders and corporate behavioral decisions.At present,many scholars are concerned about the effect of anti-takeover provisions on major shareholders,small and medium shareholders,and management,but less attention on creditors.In fact,creditors are also important providers of company operating funds.Creditors will consider the stability of the company after it is acquired,and anti-takeover provisions can be seen as a guarantee of the stability of the company and the management to a certain extent.Therefore,anti-takeover provisions may influence the creditor's decision on whether to lend funds and how much cost to ask for.In addition,the effect of the anti-takeover provisions may be related to the M&A environment.When the M&A market becomes more active,the creditor's concerns about the company's acquired risk will be stronger and it is more likely for them to identify the role of the anti-takeover provisions.At this time,the impact of the anti-takeover provisions may be more pronounced.This article takes the 2007-2016 A-share non-state listed company as a sample,empirically testing the effect of anti-takeover provisions on debt financing and the effect of takeover activity on the relationship between the two.The study finds that:(1)the anti-takeover provisions affect the decision of the creditors.Setting up anti-takeover provisions help to ease creditors' concerns about company default risk and management changes,thereby increasing the company's long-term borrowing capacity and reducing debt financing costs.(2)different types of anti-takeover provisions have different effects on debt financing,and the types of anti-takeover provisions that affect long-term borrowing capacity and debt financing costs are also different.(3)the staggered board of directors,holding time and shareholding limits,and the "strong anti-takeover provisions" have a significant impact on long-term borrowing capacity,but others provisions such as nomination of director qualification restrictions,information disclosure requirements,golden parachute,absolute majority provisions,etc.do not affect long-term borrowing financing capacity.(4)Nomination of director qualification restrictions,shareholding time and shareholding limits(convening of shareholders'meetings),golden parachute,absolute majority provisions,and "strong anti-takeover provisions" can reduce debt financing costs to some extent,but other provisions such as staggered board of directors has little effect on the cost of debt financing.(5)The impact of anti-takeover provisions on debt financing will be affected by the M&A market.When the M&A market is more active.The more likely for the company to be encountered in the hostile takeovers,the more obvious the provisions' effects are,and this can help companies increase the long-term borrowing ability more apparently.(6)The financing environment will interfere with the anti-takeover provisions and the debt financing relationship.Only when the financing environment is good,the anti-takeover provisions will significantly affect the long-term borrowing financing capacity and debt financing costs.The conclusions of this paper expand the research on the economic consequences of corporate governance,help to deeply understand the relationship between the revision of the corporate system and the decisions of other stakeholders,and provide some guidance for the company to develop targeted anti-takeover provisions.