# Excessive Defense of Antitakeover Provisions and Enterprise Value Based on PSM-DID Quasi-Natural Experimental Method

Authors: Zhang Yao; Guo Xuemeng; Jia Jia
Journal: Mobile Information Systems
 (2022)

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## Abstract

Under the background of frequent hostile takeover events in China and the autonomy of the articles of association, the articles of association of listed companies even set up antitakeover provisions with an excessive defense that unreasonably restricts the rights of shareholders. Based on the role orientation of innovative supervision, the Small and Medium-sized Investors Service Center (hereinafter referred to as “Investment and Service Center”) proposes to modify the relevant noncompliance provisions in the form of a shareholder recommendation letter. As the basic requirements of the articles of association and the relevant laws in corporate governance are increasingly inconsistent, the legal review of the articles of association is particularly important. This article determines the identification standard of excessive defense of antitakeover provisions by manually collecting the shareholder suggestion letter of the investment service center, the announcement on amendment of association articles of listed companies, and relevant laws and regulations. On this basis, the PSM-DID quasi-natural experimental method is used to empirically test the impact of excessive defense of antitakeover provisions on enterprise value. The study finds that the excessive defense of antitakeover provisions significantly inhibited the enterprise value. In this article, taking a-share listed companies in Shanghai and Shenzhen stock markets in 2007–2018 as an example, with the construction of antiacquisition clause excessive defense index (ATP end), relying on the “quasi-natural experiment” method of PSM-DID, we discuss the impact of excessive defense antiacquisition clause on the value of the enterprise and its impact path analysis. Further study found that its restriction mechanism was reflected in the significant increase of the first type of agency cost and the second type of agency cost. At the same time, the correlation between management compensation and performance and the correlation between management and professional performance are further reduced. Excessive defense against antiacquisition terms can reduce the corporate value, and the impact path of this effect is achieved by increasing type 1 agent costs and type 2 agent costs. It shows that the controlling shareholders are more likely to collude with the management, which aggravates the agency problem. The research conclusion of this article provides legal and economic empirical evidence for listed companies to reasonably set up antitakeover provisions and is also of great significance to innovative regulatory methods such as investment service centers. Excessive defense against antitakeover terms will enhance the dual-ditch effect and ultimately damage corporate value.


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## Body

## 1. Introduction

With the rise of the split share structure reform and the wave of acquisition in the capital market in 2007, antitakeover has increasingly become the focus of research. The management and major shareholders of listed companies have attached importance to the setting of antitakeover provisions of “shark repellent.” As the current relevant laws and regulations represented by the Administrative Measures for the Anti-takeover of Listed Companies do not clearly specify the scope of autonomy of the association articles, the antitakeover provisions in the association articles of listed companies have the new feature of excessive defense [1]. The shareholding ratio of the nomination right of director candidates is up to 30%, and the nomination of director candidates holds shares continuously for up to 5 years. Even some articles of association directly restrict the qualification of director candidates, and the compensation multiple of the golden parachute provision is even up to 1000 times the total annual salary of the dismissed directors [2]. The above statistics fully show that some counterprovisions set up in the articles of association of listed companies have seriously infringed on the basic rights and interests of shareholders. With more and more inconsistencies between the articles of association and the basic requirements of relevant laws in corporate governance, the legal review of the articles of association is particularly important [3]. A hostile takeover is a relative goodwill takeover without the consent of the actual controller (or management) of the listed company. Once the hostile acquisition is successful, the acquirer will gain the actual control of the listed company.Facing the practical problem of “excessive defense” of the antitakeover provisions in the articles of association of listed companies, the investment service center responded to the call for “innovative supervision mode” put forward by the party, combined “the essence of public implementation mechanism” with “the form of private implementation mechanism,” and innovated “shareholding and exercise.” Under the essence of official supervision background, exercising the basic rights and interests of ordinary shareholders and combining “prior supervision” and “in-process supervision” not only extends the supervision path but also overcomes the lag of postsupervision. Since its establishment, on the basis of its existing positioning and functions, the investment service center has carried out a series of work in the retrieval and analysis of corporate governance and articles of association and actively urged listed companies to modify their nonconforming and illegal articles of association by sending shareholder suggestions [4, 5]. Therefore, based on the special research background of China’s reality, directly using the antitakeover provisions set in the articles of association of listed companies as the research object cannot truly reflect the external governance role of the antitakeover provisions. It is more necessary to effectively identify the excessive defense of antitakeover provisions and study their real governance effects based on the legal perspective of antitakeover provisions and the practice of scientific exercise of power in the investment and service center [6]. It is worth noting that most of the existing studies on antiacquisition terms are based on mature capital markets, with very little research on emerging capital markets. Compared with mature capital markets such as the United States, the laws and regulations of emerging capital markets are not sound enough, and the company’s equity is highly concentrated. The first type of agency problem between management and shareholders and the second type of agency problem between major shareholders and minority shareholders exist at the same time, and the second type of agency problem is particularly prominent. This institutional difference makes the influence path and result of the antiacquisition terms on the company value may be different from that of the mature capital markets.At the same time, there is no unified conclusion on how antitakeover provisions affect enterprise value in academic research. Some scholars believe that there is a positive correlation between antitakeover provisions and enterprise value, which supports the long-term value hypothesis. Other scholars believe that antitakeover provisions have a negative correlation with enterprise value, which verifies the trench hypothesis. It is worth noting that most of the existing studies on antitakeover provisions are based on mature capital markets, and most of the relevant studies are based on the simple perspective of “whether to set antitakeover provisions,” and there is no in-depth analysis of the legal effect of antitakeover provisions. Under the background of China’s special system, the autonomy of the articles of association leads to the excessive defense of antitakeover provisions, which provides a rare opportunity to study the economic consequences of antitakeover provisions in emerging market countries [7, 8]. Therefore, based on the characteristics of different institutional environments, this article studies how to scientifically measure the excessive defense of antitakeover provisions under the realistic background of China? How is the impact of excessive defense of antitakeover provisions on enterprise value reflected? How is its influence mechanism realized? The differences in the institutional environment and the provisions of the articles of association provide a rare opportunity to study the influence of the antiacquisition provisions in the articles of association of listed companies in emerging markets on the corporate governance mechanism and corporate value.Based on the above problems, this article manually collects the antitakeover provisions, the recommendation letter of the investment service center, the characteristic rights protection services of the investment service center, and other data in the articles of association, corresponding to the requirements of specific provisions such as the company law and the measures for the administration of the acquisition of listed companies with the contents of the recommendation letter of the investment service center one by one, so as to determine the identification standard of excessive defense of antitakeover provisions. On this basis, the quasi-natural experimental method of PSM-DID is used to test the impact of excessive defense of antitakeover provisions on enterprise value. The empirical results show that there is a significant negative correlation between the excessive defense of antitakeover provisions and enterprise value [9]. With the construction of antiacquisition clause overdefense index (ATP end), based on the “quasi-natural experiment” method of PSM-DID, the influence of overdefense antiacquisition clause on enterprise value and its influence path are analyzed. After testing the changes in type I and type II agency costs, R&D input, and output before and after setting excessive defense antitakeover provisions, the study finds that excessive defense of antitakeover provisions will increase the type I and type II agency costs of enterprises. It leads to collusion between controlling shareholders and management, which verifies the trench hypothesis and reduces the long-term value of the enterprise. The research conclusion of this article provides legal and economic empirical evidence for listed companies to reasonably set up antiacquisition clauses, which is of great significance to innovative regulatory means such as investment service centers.The research contributions of this article are as follows: firstly, based on the special background of the autonomy of the association articles of listed companies in China, it provides new empirical evidence for the study of the economic consequences of antitakeover provisions in emerging markets. The existing antitakeover literature is mainly based on the mature capital market environment [10, 11]. As a representative of emerging markets, due to the need to improve the formulation and implementation of laws and regulations, there is a special economic phenomenon of “excessive defense of antitakeover provisions.” Its setting motivation and governance effect are different from those in developed markets. Therefore, combined with China’s special institutional background, this article analyzes the governance effect of excessive defense of antitakeover provisions and supplements the relevant research on antitakeover provisions in China. Secondly, this article deeply analyzes the impact path of excessive defense of antitakeover provisions on enterprise value and enriches the research results of the impact mechanism. In addition to verifying the first type of agency cost and the second type of agency cost, it also further tests its impact on the salary performance relevance of the management and the level of professional performance relevance of the management, verifies the collusion tendency between the controlling shareholder and the company’s management, and supplements the relevant literature on its mechanism. Thirdly, based on the legal and economic perspectives, this article deeply discusses the legal effect of antitakeover provisions from the legal perspective and discusses its impact on enterprise value from the economic perspective. Previous studies are only based on a single legal perspective or economic perspective and rarely combine the two for in-depth analysis. The research conclusions of this article have positive reference significance for the formulation of policies of relevant regulatory institutions and the implementation effect of innovative regulatory methods for investment service centers [12].


## 2. Theoretical Analysis and Research Hypothesis

### 2.1. Excessive Defense of Antitakeover Provisions and Enterprise Value

With the rise of the M&A wave, many companies have set up antitakeover provisions, and many scholars have also conducted in-depth research on them. Foreign scholars prefer to study M&A results, financial performance, market response, enterprise innovation, etc. However, Chinese scholars prefer the impact on the rotation of executive directors, the protection of minority shareholders’ rights and interests, agency costs, and risk perception. Because of China’s highly centralized ownership structure, domestic scholars prefer to study the impact of antitakeover provisions on agency costs and the protection of minority shareholders’ rights and interests. The research results are more in line with China’s actual national conditions [13].Previous studies have found that the setting of antitakeover provisions was more likely to be one of the ways to maintain the position of management. Many scholars have verified the trench hypothesis. In order to avoid the acquisition of enterprises at low prices, the management of the company usually tends to invest in short-term projects that bring faster and more definite benefits to the company, resulting in insufficient long-term innovation investment and damaging the long-term value of the enterprise. It was found that the long-term market wealth effect was negative after the implementation of the “poison pill plan,” indicating that the capital market generally believes that the trench effect is greater than the housekeeper effect. Cohen and Wang used the natural experimental method to find that the terms of a hierarchical board of directors will reduce the enterprise value. It was found that the stronger the company’s defense ability was, the more inclined it was to establish a business empire without considering the optimization of investment decisions, which impairs the improvement of enterprise value. Based on the practical data on China’s emerging markets, Zhang Weihua found that the setting of antitakeover provisions had a significant negative effect on the company’s value and significantly increased the second type of agency cost [14].On the contrary, many scholars support the long-term value hypothesis and believe that antitakeover provisions can reduce the acquired risk to a certain extent and have a positive impact on enterprise value. Sanjeev et al. believed that antitakeover provisions could become a shield against short-term market pressure, and there was no need for real earnings management to meet the needs of investors so as to promote the improvement of enterprise value. It was found that the layered board provision could encourage the company’s management to invest in long-term projects, thus improving the enterprise value. It was found that the antitakeover provisions did not necessarily reduce the enterprise value, and its main role was to improve the company’s negotiation ability so as to avoid the risk of M&A. Taking state laws as exogenous events, we mainly studied the value effect of innovative companies, and it was found that antitakeover provisions could promote the improvement of enterprise value. It was found that for companies with high management quality, antitakeover provisions were conducive to improving enterprise financial indicators. Johnson et al. took IPO companies as the research object and the research found that antitakeover provisions helped to stabilize the relationship between enterprise management and upstream and downstream and improved the value and performance of IPO companies [15, 16].To sum up, based on the foreign real capital market, the impact of antitakeover provisions on the company’s value has not reached a unified conclusion. In the context of China’s special autonomy of the articles of association, many listed companies modify the articles of association and introduce antitakeover provisions with excessive defense. In addition, compared with foreign capital markets, the equity of China’s listed companies is more concentrated. Compared with the management trench hypothesis, the controlling shareholder trench hypothesis is more suitable for China’s actual national conditions. It can read the articles of association, the announcement on amendment of articles of association, the announcement of the relevant board of directors, and the recommendation letter of the investment service center according to the accounting year. Through the one-to-one comparison of data, it is found that the problem of excessive defense of antitakeover provisions is mainly reflected in three types of provisions, such as the nomination right of director candidates, hierarchical board of directors, and golden parachute. Starting from different stakeholders, the study found that the nomination right of director candidates and the layered board of director’s provision more safeguard the control right of the board of directors, while the golden parachute provision more safeguards the control right of the management [17, 18].The golden parachute provision of excessive defense supports the management trench hypothesis and believes that its excessive defense is reflected in the self-interest behavior of the company’s management, and it is more to maintain the control of the management. The excessive defensive nomination right of director candidates and the layered board of directors provision more support the trench hypothesis of controlling shareholders and believe that the antitakeover provisions not only protects the management but also consolidates the position of controlling shareholders, thus providing shelter for the tunneling behavior of major shareholders. However, as the representative of shareholders, there is a certain contradiction between the board of directors and the management. In order to reduce the risk of being acquired, the management chooses to reduce the shareholder value to a certain extent, and the board of directors supports the long-term value hypothesis. The long-term value hypothesis holds that the establishment of antitakeover provisions can send a positive signal to investors that the management and major shareholders have confidence in the long-term operation and development of the enterprise, protect the management and major shareholders from market pressure and avoid short-term decision-making behavior. Under the special institutional background of China, how the excessive defense antitakeover provisions affect the enterprise value depends on the combined influence of the trench hypothesis (management trench, shareholder trench) and the long-term value hypothesis. Therefore, this article puts forward the competitive hypothesis:(i)
Hypothesis 1a: setting antitakeover provisions with excessive defense in the articles of association will lead to the loss of enterprise value [19–21].(ii)
Hypothesis 1b: setting antitakeover provisions with excessive defense in the articles of association will promote the promotion of enterprise value.


### 2.2. Excessive Defense of Antitakeover Provisions, Agency Cost, and Enterprise Innovation

There are two completely opposite paths for the impact of excessive defense of antitakeover provisions on enterprise value, one is the agency cost path based on the management trench hypothesis and the controlling shareholder trench hypothesis, and the other is the enterprise innovation path based on the long-term value hypothesis. Through the above analysis, the impact mechanism of excessive defense of antitakeover provisions on enterprise value is the result of the comprehensive action of agency cost path and innovation path [22].Under the agency cost hypothesis, the antiacquisition clause protects the manager status at the expense of reducing the shareholder wealth, thus intensifying the agency conflict between managers and shareholders. There are several important assumptions in the agency cost hypothesis. First, managers attach great importance to control rights, and their desire for control right makes the interests of management go against the interests of shareholders. This conflict of interest is very costly for shareholders. Second, the control market is a kind of corporate governance mechanism, which can alleviate the agency cost of external equity.The agency cost path shows that when listed companies set antitakeover provisions with excessive defense, the management will not receive serious punishment and its company reputation will not be damaged under the pretext of autonomy of the articles of association. At most, it will receive the shareholder recommendation letter from the public welfare shareholder investment service center. In addition, setting antitakeover provisions with excessive defense in advance to prevent malicious mergers and acquisitions is easier to obtain the sympathy of public opinion and shape a good image of tragic heroes. Under the condition that the restrictive effect of the reputation mechanism is gradually weakened, the possibility of improper investment and financing decisions by the management will increase, and the enterprise value will further decrease. The controlling shareholders support the listed company to set up antitakeover provisions with excessive defense, which prevents the transfer of the company’s control. If the controlling shareholders firmly grasp the company’s control, it is likely to damage the interests of minority shareholders and ignore the growth of the long-term value of the enterprise. Therefore, based on the above analysis, this article puts forward Hypothesis 2.(i)
Hypothesis 2a.: setting antitakeover provisions with excessive defense in the articles of association will lead to the increase of the first kind of agency cost [22–25].(ii)
Hypothesis 2b: setting antitakeover provisions with excessive defense in the articles of association will lead to the increase of the second kind of agency cost.As an external governance mechanism, antitakeover provision is very important to solve the contradiction between short-term market pressure and long-term interests represented by innovation. The path of the housekeeper theory hypothesis and long-term value creation theory hypothesis is to overdefend the antitakeover provisions, protect the management from the performance pressure and acquisition risk of the capital market, and reserve development space for long-term innovation of the management, so as to enhance the enterprise value. Therefore, based on the above analysis, this article puts forward Hypothesis 3.(i)
Hypothesis 3a: setting antitakeover provisions with excessive defense in the articles of association will promote the increase of enterprise innovation investment [26].(ii)
Hypothesis 3b: setting antitakeover provisions with excessive defense in the articles of association will promote the improvement of enterprise innovation output.


## 2.1. Excessive Defense of Antitakeover Provisions and Enterprise Value

With the rise of the M&A wave, many companies have set up antitakeover provisions, and many scholars have also conducted in-depth research on them. Foreign scholars prefer to study M&A results, financial performance, market response, enterprise innovation, etc. However, Chinese scholars prefer the impact on the rotation of executive directors, the protection of minority shareholders’ rights and interests, agency costs, and risk perception. Because of China’s highly centralized ownership structure, domestic scholars prefer to study the impact of antitakeover provisions on agency costs and the protection of minority shareholders’ rights and interests. The research results are more in line with China’s actual national conditions [13].Previous studies have found that the setting of antitakeover provisions was more likely to be one of the ways to maintain the position of management. Many scholars have verified the trench hypothesis. In order to avoid the acquisition of enterprises at low prices, the management of the company usually tends to invest in short-term projects that bring faster and more definite benefits to the company, resulting in insufficient long-term innovation investment and damaging the long-term value of the enterprise. It was found that the long-term market wealth effect was negative after the implementation of the “poison pill plan,” indicating that the capital market generally believes that the trench effect is greater than the housekeeper effect. Cohen and Wang used the natural experimental method to find that the terms of a hierarchical board of directors will reduce the enterprise value. It was found that the stronger the company’s defense ability was, the more inclined it was to establish a business empire without considering the optimization of investment decisions, which impairs the improvement of enterprise value. Based on the practical data on China’s emerging markets, Zhang Weihua found that the setting of antitakeover provisions had a significant negative effect on the company’s value and significantly increased the second type of agency cost [14].On the contrary, many scholars support the long-term value hypothesis and believe that antitakeover provisions can reduce the acquired risk to a certain extent and have a positive impact on enterprise value. Sanjeev et al. believed that antitakeover provisions could become a shield against short-term market pressure, and there was no need for real earnings management to meet the needs of investors so as to promote the improvement of enterprise value. It was found that the layered board provision could encourage the company’s management to invest in long-term projects, thus improving the enterprise value. It was found that the antitakeover provisions did not necessarily reduce the enterprise value, and its main role was to improve the company’s negotiation ability so as to avoid the risk of M&A. Taking state laws as exogenous events, we mainly studied the value effect of innovative companies, and it was found that antitakeover provisions could promote the improvement of enterprise value. It was found that for companies with high management quality, antitakeover provisions were conducive to improving enterprise financial indicators. Johnson et al. took IPO companies as the research object and the research found that antitakeover provisions helped to stabilize the relationship between enterprise management and upstream and downstream and improved the value and performance of IPO companies [15, 16].To sum up, based on the foreign real capital market, the impact of antitakeover provisions on the company’s value has not reached a unified conclusion. In the context of China’s special autonomy of the articles of association, many listed companies modify the articles of association and introduce antitakeover provisions with excessive defense. In addition, compared with foreign capital markets, the equity of China’s listed companies is more concentrated. Compared with the management trench hypothesis, the controlling shareholder trench hypothesis is more suitable for China’s actual national conditions. It can read the articles of association, the announcement on amendment of articles of association, the announcement of the relevant board of directors, and the recommendation letter of the investment service center according to the accounting year. Through the one-to-one comparison of data, it is found that the problem of excessive defense of antitakeover provisions is mainly reflected in three types of provisions, such as the nomination right of director candidates, hierarchical board of directors, and golden parachute. Starting from different stakeholders, the study found that the nomination right of director candidates and the layered board of director’s provision more safeguard the control right of the board of directors, while the golden parachute provision more safeguards the control right of the management [17, 18].The golden parachute provision of excessive defense supports the management trench hypothesis and believes that its excessive defense is reflected in the self-interest behavior of the company’s management, and it is more to maintain the control of the management. The excessive defensive nomination right of director candidates and the layered board of directors provision more support the trench hypothesis of controlling shareholders and believe that the antitakeover provisions not only protects the management but also consolidates the position of controlling shareholders, thus providing shelter for the tunneling behavior of major shareholders. However, as the representative of shareholders, there is a certain contradiction between the board of directors and the management. In order to reduce the risk of being acquired, the management chooses to reduce the shareholder value to a certain extent, and the board of directors supports the long-term value hypothesis. The long-term value hypothesis holds that the establishment of antitakeover provisions can send a positive signal to investors that the management and major shareholders have confidence in the long-term operation and development of the enterprise, protect the management and major shareholders from market pressure and avoid short-term decision-making behavior. Under the special institutional background of China, how the excessive defense antitakeover provisions affect the enterprise value depends on the combined influence of the trench hypothesis (management trench, shareholder trench) and the long-term value hypothesis. Therefore, this article puts forward the competitive hypothesis:(i)
Hypothesis 1a: setting antitakeover provisions with excessive defense in the articles of association will lead to the loss of enterprise value [19–21].(ii)
Hypothesis 1b: setting antitakeover provisions with excessive defense in the articles of association will promote the promotion of enterprise value.


## 2.2. Excessive Defense of Antitakeover Provisions, Agency Cost, and Enterprise Innovation

There are two completely opposite paths for the impact of excessive defense of antitakeover provisions on enterprise value, one is the agency cost path based on the management trench hypothesis and the controlling shareholder trench hypothesis, and the other is the enterprise innovation path based on the long-term value hypothesis. Through the above analysis, the impact mechanism of excessive defense of antitakeover provisions on enterprise value is the result of the comprehensive action of agency cost path and innovation path [22].Under the agency cost hypothesis, the antiacquisition clause protects the manager status at the expense of reducing the shareholder wealth, thus intensifying the agency conflict between managers and shareholders. There are several important assumptions in the agency cost hypothesis. First, managers attach great importance to control rights, and their desire for control right makes the interests of management go against the interests of shareholders. This conflict of interest is very costly for shareholders. Second, the control market is a kind of corporate governance mechanism, which can alleviate the agency cost of external equity.The agency cost path shows that when listed companies set antitakeover provisions with excessive defense, the management will not receive serious punishment and its company reputation will not be damaged under the pretext of autonomy of the articles of association. At most, it will receive the shareholder recommendation letter from the public welfare shareholder investment service center. In addition, setting antitakeover provisions with excessive defense in advance to prevent malicious mergers and acquisitions is easier to obtain the sympathy of public opinion and shape a good image of tragic heroes. Under the condition that the restrictive effect of the reputation mechanism is gradually weakened, the possibility of improper investment and financing decisions by the management will increase, and the enterprise value will further decrease. The controlling shareholders support the listed company to set up antitakeover provisions with excessive defense, which prevents the transfer of the company’s control. If the controlling shareholders firmly grasp the company’s control, it is likely to damage the interests of minority shareholders and ignore the growth of the long-term value of the enterprise. Therefore, based on the above analysis, this article puts forward Hypothesis 2.(i)
Hypothesis 2a.: setting antitakeover provisions with excessive defense in the articles of association will lead to the increase of the first kind of agency cost [22–25].(ii)
Hypothesis 2b: setting antitakeover provisions with excessive defense in the articles of association will lead to the increase of the second kind of agency cost.As an external governance mechanism, antitakeover provision is very important to solve the contradiction between short-term market pressure and long-term interests represented by innovation. The path of the housekeeper theory hypothesis and long-term value creation theory hypothesis is to overdefend the antitakeover provisions, protect the management from the performance pressure and acquisition risk of the capital market, and reserve development space for long-term innovation of the management, so as to enhance the enterprise value. Therefore, based on the above analysis, this article puts forward Hypothesis 3.(i)
Hypothesis 3a: setting antitakeover provisions with excessive defense in the articles of association will promote the increase of enterprise innovation investment [26].(ii)
Hypothesis 3b: setting antitakeover provisions with excessive defense in the articles of association will promote the improvement of enterprise innovation output.


## 3. Research Design

### 3.1. Sample Selection and Data Source

Foreign antitakeover research is relatively mature, and the measurement of antitakeover terms mostly adopts the form of an index. The more mature indexes include the FK index created by Field and Karpoff et al. [26], G index created by Gompers et al. [16], and E index created by Bebchuk et al. [27]. Because there are significant differences in the formulation of articles of association between domestic and foreign listed companies, Chinese scholars mostly use the form of a single index to measure antitakeover provisions. Early scholars mostly used the cumulative voting system as the measurement index [28, 29]. With the widespread emergence of the cumulative voting system in the setting of the articles of association, some scholars focused on the staggered board of directors [30]. However, some scholars prefer multi-index measurement but have not formed a relatively mature index form.The preliminary design of the identification method for the excessive defense of antitakeover terms is as follows: (1) it clarifies the basic concepts. This article introduces the concept of “Excessive defense” in psychology and finds that such antitakeover provisions focus on protecting the acquiree’s own control while ignoring the principles of conforming to mandatory corporate legal norms and not damaging the interests of minority shareholders. (2) It determines the basic principles of identification methods. The first is to comply with the mandatory legal norms of the company, and the second is not to damage the overall interests of the company and minority shareholders. (3) It determines the basic content of the identification method. According to the revised contents of the articles of association of the listed company, the basic contents of identification shall be determined in combination with the shareholder recommendation letter of the investment service center and the characteristic rights protection service cases of the investment service center. It is found that there are no new types of antitakeover provisions in the articles of association of listed companies in China, but the contents of three types of antitakeover provisions such as the nomination right of director candidates, hierarchical board of directors, and golden parachute have changed greatly while increasing information disclosure obligations and cumulative voting are not of typical significance. (4) It determines the basic criteria for identification methods. The requirements of the specific provisions of the company law and the measures for the administration of the acquisition of listed companies are combined with the contents of the shareholders’ recommendation letter of the investment service center to determine the basic standards. The specific identification criteria for the excessive defense of antitakeover provisions are shown in Table1.Table 1
Identification criteria for excessive defense of antitakeover provisions.
Nomination right of director candidatesIdentification criteriaLegal basisCase support of investment service center exerciseIncrease the shareholding ratio of recommended director candidates to more than 5%Paragraph 2 of Article 102 of the company lawDexin transportation (603032) Shareholder’s proposal letter of Investment Service Center [2017] no. 1242Impose continuous holding time as a condition for shareholders to recommend candidates for the board of directorsParagraph 2 of Article 102 of the company lawEmeishan a (000888) Shareholder recommendation letter of Investment Service Center [2017] no. 1146Directly deprive the malicious acquirer of the right to nominate director candidatesParagraph 2 of Article 102 of the company law Article 53 of the guidelines for the articles of association of listed companiesTianye Co., Ltd. (600807) Shareholder recommendation letter of Investment Service Center [2017] no. 134Hierarchical board of directorsIdentification criteriaLegal basisCase support of investment service center exerciseReplacement of specific directorsArticle 45, Paragraph 1, Articles 16, 121, and 142 of the company law. Articles 8 and 33 of the measures for the administration of the acquisition of listed companiesMaoye communication (000889). Shareholder recommendation letter [2017] no. 374 of Investment Service CenterGolden parachuteIdentification criteriaLegal basisCase support of investment service center exerciseDetermine the compensation amount of the dismissed directors and their senior managers whose term of office has not expired, which shall exceed 80% of the total remuneration of the remaining term of officeParagraph 1 of article 21, paragraph 2 of article 37, paragraph 9 of article 46 and paragraph 2 of article 103 of the company law. Article 32 of the governance standards for listed companies. Article 33 of the measures for the administration of the acquisition of listed companiesPolyfluorodox (002407). Shenzhen stock exchange inquiryTo sum up, the basic identification criteria for excessive defense of antitakeover provisions are as follows: (1) the shareholding ratio of recommended director candidates increased to more than 5%; (2) imposing continuous holding time as a condition for shareholders to recommend candidates for the board of directors; (3) conditions for directly depriving the hostile acquirer of the right to nominate director candidates; (4) restrictions on the replacement of directors; (5) determining that the compensation amount of the dismissed directors and their senior managers whose term of office has not expired shall exceed 80% of the total remuneration of the remaining term of office. As long as the antitakeover provisions in the articles of association of listed companies meet any of the above standards, they are excessive defense of antitakeover provisions.Taking the listed companies in Shanghai and Shenzhen stock markets from 2007 to 2018 as the research object, the samples of companies in special industries such as finance and insurance, special operating companies such as ST and ST∗ , and listed companies with missing data are excluded, and the continuous variables are reduced by 1%. The final sample includes the data of 2621 listed companies and 20144 research samples. The antitakeover provisions in the articles of association are collected manually, and the data are obtained through keyword identification and manual judgment according to the identification standard for excessive defense of antitakeover provisions. In this article, Stata 14.0 software is used for data sorting and analysis.


### 3.2. Variable Definition

#### 3.2.1. Explained Variable

Enterprise value: based on the research of Cremers [31] and Bhojraj [32], this article selects Tobin’sQ as the index to measure enterprise value.Agency cost: based on the research of Jiang and Jiranyakul [33], this article uses Cost to represent agency cost. The first kind of agency cost Cost1 is measured by the sales management expense rate. The second kind of agency cost Cost2 is measured by the capital occupation rate of major shareholders to minority shareholders.Enterprise innovation: based on the research of Chemanur [34], this article uses Innovation to represent enterprise innovation. R and D investment RNDR is measured by the R&D investment ratio. The R&D output IPantent is measured by the number of enterprise invention patent applications that best reflect the innovation ability. Considering the lag of R&D output, this study uses the R&D output variable of the next period as the explained variable.


#### 3.2.2. Explanatory Variables

The explanatory variable is the excessive defense of antitakeover provisions (ATP over), which mainly includes the following five types of excessive defense of antitakeover provisions. The number of excessive defense of antitakeover provisions (ATP over) is a dummy variable. When any of the following antitakeover provisions with excessive defense is set in the articles of association of a listed company, the value of ATP over is 1; otherwise, it is 0. (1) If the articles of association of the listed company in year t set the excessive defense provision (SL over) on the shareholding ratio restriction of the nomination right of directors, the value from SL overt to SL overt + n is 1, and the value of SL overt + n is 0. (2) If the articles of association of the listed company in year t set the excessive defense provision (TL over) on the shareholding time limit of the nomination right of directors, the value from TL overt to TL overt + n is 1 and TL overt + n is 0. (3) If the articles of association of a listed company set the excessive defense provision (QE over) on the qualification examination of directors, the value from QE overt to QE overt + n is 1, and QE overt + n is 0. (4) If the articles of association of a listed company sets the excessive defense provision (SB over) on staggered board of directors, the value from SB over to SB overt + n is 1, and the value of SB overt + n is 0. (5) If the articles of association of the listed company set the excessive defense provision (GP over) on the golden parachute, the value from GP overt to GP overt + n is 1, and the value of GP overt + n is 0.


#### 3.2.3. Control Variables

Referring to the relevant literature of Chen [35], the control variables selected in this article are shown in Table 2.Table 2
Variable names and definitions.
VariableVariable symbolVariable descriptionExplained variableTobin’sQCompany market value/asset replacement costCost1(Sales expenses + administrative expenses)/main business incomeCost2(Other receivables - other payables)/total assetsRNDRR&D investment/operating incomeIPantentNumber of invention patent applications of the enterprise in the next phaseExplain variableATP_overOverdefense antitakeover provisions mainly include five types of overdefense antitakeover provisions. As long as one of the overdefense antitakeover provisions is set in the articles of association, the value is 1; otherwise, it is 0ATP overControl variableBoardNatural logarithm of the number of directorsIndDirRNumber of independent directors/total number of directorsMana_holdNumber of shares held by management/total number of shares of the companyTop1Number of shares held by the largest shareholder/total number of shares of the companySizeNatural logarithm of total assets at the end of the yearLevTotal liabilities/total assetsROANet profit/average balance of total assetsInd_dumIndustry dummy variableYear_dumAnnual dummy variable


### 3.3. Model Design

This article adopts the PSM-DID analysis method, which is divided into two steps: the first step is divided into an experimental group and matched control group according to the determinant model. The decisive factor model for testing the impact of excessive defense of antitakeover provisions is adopted, and model (1) is as follows:(1)ATP_overi=α0+α1Boardit+α2IndDirRit+α3Mana_holdit+α4Top�1it+α5Sizeit+α6Levit+α7ROAit+∑​Yeart+∑​Industryi+εit.For companies with an excessive defense of antitakeover provisions, if the excessive defense of antitakeover provisions (ATP over) is set in the articles of association of listed companies in year t, the value from ATP overt to ATP overt + n is 1 and ATP overt − n is 0. For companies without the excessive defense of antitakeover provisions, ATP over is 0. Through model (1), it can test the impact of various factors in the model on the company when deciding whether to set excessive defense of antitakeover provisions.Through the determinant model, it can match to form the tendency score. For the whole sample period, a companyj in the control group without the excessive defense of antitakeover provision is found, which is as similar as possible to the determinant of the experimental group i with an excessive defense of antitakeover provisions, so that an effective control group with similar probability to the experimental group can be found, and applied to the follow-up test [32].The second step is to use the double difference method. This article uses the following model (2):(2)Consequencesi=β0+β1ATP−overi+β2Afterit+β3ATP−overi×Afterit+∑​Controlsit+∑​Yeart+∑​Industryi+εit.In model (2), the excessive defense of antitakeover provisions (ATP over) is a dummy variable. When the excessive defense of antitakeover provisions is set in the articles of association, the value is 1. When the excessive defense of antitakeover provisions is not set in the articles of association, the value is 0. After is a virtual variable. When the articles of association are set with an excessive defense of antitakeover provisions, the value is 1; otherwise, it is 0. For the control group, After is 1 in the same year after the experimental group companies with an excessive defense of antitakeover provisions are matched accordingly. ATP overi´Afterit indicates the difference between the experimental group and the control group before and after setting the excessive defense of antitakeover provisions. The explained variable (Consequence) represents enterprise value (Tobin’sQ), the first kind of agency cost (Cost1), the second kind of agency cost (Cost2), enterprise innovation input (RNDR), and enterprise innovation output (IPantent), respectively. In addition, the model controls the fixed effects of industries and years to eliminate the influencing factors of macroeconomy and specific industries.


## 3.1. Sample Selection and Data Source

Foreign antitakeover research is relatively mature, and the measurement of antitakeover terms mostly adopts the form of an index. The more mature indexes include the FK index created by Field and Karpoff et al. [26], G index created by Gompers et al. [16], and E index created by Bebchuk et al. [27]. Because there are significant differences in the formulation of articles of association between domestic and foreign listed companies, Chinese scholars mostly use the form of a single index to measure antitakeover provisions. Early scholars mostly used the cumulative voting system as the measurement index [28, 29]. With the widespread emergence of the cumulative voting system in the setting of the articles of association, some scholars focused on the staggered board of directors [30]. However, some scholars prefer multi-index measurement but have not formed a relatively mature index form.The preliminary design of the identification method for the excessive defense of antitakeover terms is as follows: (1) it clarifies the basic concepts. This article introduces the concept of “Excessive defense” in psychology and finds that such antitakeover provisions focus on protecting the acquiree’s own control while ignoring the principles of conforming to mandatory corporate legal norms and not damaging the interests of minority shareholders. (2) It determines the basic principles of identification methods. The first is to comply with the mandatory legal norms of the company, and the second is not to damage the overall interests of the company and minority shareholders. (3) It determines the basic content of the identification method. According to the revised contents of the articles of association of the listed company, the basic contents of identification shall be determined in combination with the shareholder recommendation letter of the investment service center and the characteristic rights protection service cases of the investment service center. It is found that there are no new types of antitakeover provisions in the articles of association of listed companies in China, but the contents of three types of antitakeover provisions such as the nomination right of director candidates, hierarchical board of directors, and golden parachute have changed greatly while increasing information disclosure obligations and cumulative voting are not of typical significance. (4) It determines the basic criteria for identification methods. The requirements of the specific provisions of the company law and the measures for the administration of the acquisition of listed companies are combined with the contents of the shareholders’ recommendation letter of the investment service center to determine the basic standards. The specific identification criteria for the excessive defense of antitakeover provisions are shown in Table1.Table 1
Identification criteria for excessive defense of antitakeover provisions.
Nomination right of director candidatesIdentification criteriaLegal basisCase support of investment service center exerciseIncrease the shareholding ratio of recommended director candidates to more than 5%Paragraph 2 of Article 102 of the company lawDexin transportation (603032) Shareholder’s proposal letter of Investment Service Center [2017] no. 1242Impose continuous holding time as a condition for shareholders to recommend candidates for the board of directorsParagraph 2 of Article 102 of the company lawEmeishan a (000888) Shareholder recommendation letter of Investment Service Center [2017] no. 1146Directly deprive the malicious acquirer of the right to nominate director candidatesParagraph 2 of Article 102 of the company law Article 53 of the guidelines for the articles of association of listed companiesTianye Co., Ltd. (600807) Shareholder recommendation letter of Investment Service Center [2017] no. 134Hierarchical board of directorsIdentification criteriaLegal basisCase support of investment service center exerciseReplacement of specific directorsArticle 45, Paragraph 1, Articles 16, 121, and 142 of the company law. Articles 8 and 33 of the measures for the administration of the acquisition of listed companiesMaoye communication (000889). Shareholder recommendation letter [2017] no. 374 of Investment Service CenterGolden parachuteIdentification criteriaLegal basisCase support of investment service center exerciseDetermine the compensation amount of the dismissed directors and their senior managers whose term of office has not expired, which shall exceed 80% of the total remuneration of the remaining term of officeParagraph 1 of article 21, paragraph 2 of article 37, paragraph 9 of article 46 and paragraph 2 of article 103 of the company law. Article 32 of the governance standards for listed companies. Article 33 of the measures for the administration of the acquisition of listed companiesPolyfluorodox (002407). Shenzhen stock exchange inquiryTo sum up, the basic identification criteria for excessive defense of antitakeover provisions are as follows: (1) the shareholding ratio of recommended director candidates increased to more than 5%; (2) imposing continuous holding time as a condition for shareholders to recommend candidates for the board of directors; (3) conditions for directly depriving the hostile acquirer of the right to nominate director candidates; (4) restrictions on the replacement of directors; (5) determining that the compensation amount of the dismissed directors and their senior managers whose term of office has not expired shall exceed 80% of the total remuneration of the remaining term of office. As long as the antitakeover provisions in the articles of association of listed companies meet any of the above standards, they are excessive defense of antitakeover provisions.Taking the listed companies in Shanghai and Shenzhen stock markets from 2007 to 2018 as the research object, the samples of companies in special industries such as finance and insurance, special operating companies such as ST and ST∗ , and listed companies with missing data are excluded, and the continuous variables are reduced by 1%. The final sample includes the data of 2621 listed companies and 20144 research samples. The antitakeover provisions in the articles of association are collected manually, and the data are obtained through keyword identification and manual judgment according to the identification standard for excessive defense of antitakeover provisions. In this article, Stata 14.0 software is used for data sorting and analysis.


## 3.2. Variable Definition

### 3.2.1. Explained Variable

Enterprise value: based on the research of Cremers [31] and Bhojraj [32], this article selects Tobin’sQ as the index to measure enterprise value.Agency cost: based on the research of Jiang and Jiranyakul [33], this article uses Cost to represent agency cost. The first kind of agency cost Cost1 is measured by the sales management expense rate. The second kind of agency cost Cost2 is measured by the capital occupation rate of major shareholders to minority shareholders.Enterprise innovation: based on the research of Chemanur [34], this article uses Innovation to represent enterprise innovation. R and D investment RNDR is measured by the R&D investment ratio. The R&D output IPantent is measured by the number of enterprise invention patent applications that best reflect the innovation ability. Considering the lag of R&D output, this study uses the R&D output variable of the next period as the explained variable.


### 3.2.2. Explanatory Variables

The explanatory variable is the excessive defense of antitakeover provisions (ATP over), which mainly includes the following five types of excessive defense of antitakeover provisions. The number of excessive defense of antitakeover provisions (ATP over) is a dummy variable. When any of the following antitakeover provisions with excessive defense is set in the articles of association of a listed company, the value of ATP over is 1; otherwise, it is 0. (1) If the articles of association of the listed company in year t set the excessive defense provision (SL over) on the shareholding ratio restriction of the nomination right of directors, the value from SL overt to SL overt + n is 1, and the value of SL overt + n is 0. (2) If the articles of association of the listed company in year t set the excessive defense provision (TL over) on the shareholding time limit of the nomination right of directors, the value from TL overt to TL overt + n is 1 and TL overt + n is 0. (3) If the articles of association of a listed company set the excessive defense provision (QE over) on the qualification examination of directors, the value from QE overt to QE overt + n is 1, and QE overt + n is 0. (4) If the articles of association of a listed company sets the excessive defense provision (SB over) on staggered board of directors, the value from SB over to SB overt + n is 1, and the value of SB overt + n is 0. (5) If the articles of association of the listed company set the excessive defense provision (GP over) on the golden parachute, the value from GP overt to GP overt + n is 1, and the value of GP overt + n is 0.


### 3.2.3. Control Variables

Referring to the relevant literature of Chen [35], the control variables selected in this article are shown in Table 2.Table 2
Variable names and definitions.
VariableVariable symbolVariable descriptionExplained variableTobin’sQCompany market value/asset replacement costCost1(Sales expenses + administrative expenses)/main business incomeCost2(Other receivables - other payables)/total assetsRNDRR&D investment/operating incomeIPantentNumber of invention patent applications of the enterprise in the next phaseExplain variableATP_overOverdefense antitakeover provisions mainly include five types of overdefense antitakeover provisions. As long as one of the overdefense antitakeover provisions is set in the articles of association, the value is 1; otherwise, it is 0ATP overControl variableBoardNatural logarithm of the number of directorsIndDirRNumber of independent directors/total number of directorsMana_holdNumber of shares held by management/total number of shares of the companyTop1Number of shares held by the largest shareholder/total number of shares of the companySizeNatural logarithm of total assets at the end of the yearLevTotal liabilities/total assetsROANet profit/average balance of total assetsInd_dumIndustry dummy variableYear_dumAnnual dummy variable


## 3.2.1. Explained Variable

Enterprise value: based on the research of Cremers [31] and Bhojraj [32], this article selects Tobin’sQ as the index to measure enterprise value.Agency cost: based on the research of Jiang and Jiranyakul [33], this article uses Cost to represent agency cost. The first kind of agency cost Cost1 is measured by the sales management expense rate. The second kind of agency cost Cost2 is measured by the capital occupation rate of major shareholders to minority shareholders.Enterprise innovation: based on the research of Chemanur [34], this article uses Innovation to represent enterprise innovation. R and D investment RNDR is measured by the R&D investment ratio. The R&D output IPantent is measured by the number of enterprise invention patent applications that best reflect the innovation ability. Considering the lag of R&D output, this study uses the R&D output variable of the next period as the explained variable.


## 3.2.2. Explanatory Variables

The explanatory variable is the excessive defense of antitakeover provisions (ATP over), which mainly includes the following five types of excessive defense of antitakeover provisions. The number of excessive defense of antitakeover provisions (ATP over) is a dummy variable. When any of the following antitakeover provisions with excessive defense is set in the articles of association of a listed company, the value of ATP over is 1; otherwise, it is 0. (1) If the articles of association of the listed company in year t set the excessive defense provision (SL over) on the shareholding ratio restriction of the nomination right of directors, the value from SL overt to SL overt + n is 1, and the value of SL overt + n is 0. (2) If the articles of association of the listed company in year t set the excessive defense provision (TL over) on the shareholding time limit of the nomination right of directors, the value from TL overt to TL overt + n is 1 and TL overt + n is 0. (3) If the articles of association of a listed company set the excessive defense provision (QE over) on the qualification examination of directors, the value from QE overt to QE overt + n is 1, and QE overt + n is 0. (4) If the articles of association of a listed company sets the excessive defense provision (SB over) on staggered board of directors, the value from SB over to SB overt + n is 1, and the value of SB overt + n is 0. (5) If the articles of association of the listed company set the excessive defense provision (GP over) on the golden parachute, the value from GP overt to GP overt + n is 1, and the value of GP overt + n is 0.


## 3.2.3. Control Variables

Referring to the relevant literature of Chen [35], the control variables selected in this article are shown in Table 2.Table 2
Variable names and definitions.
VariableVariable symbolVariable descriptionExplained variableTobin’sQCompany market value/asset replacement costCost1(Sales expenses + administrative expenses)/main business incomeCost2(Other receivables - other payables)/total assetsRNDRR&D investment/operating incomeIPantentNumber of invention patent applications of the enterprise in the next phaseExplain variableATP_overOverdefense antitakeover provisions mainly include five types of overdefense antitakeover provisions. As long as one of the overdefense antitakeover provisions is set in the articles of association, the value is 1; otherwise, it is 0ATP overControl variableBoardNatural logarithm of the number of directorsIndDirRNumber of independent directors/total number of directorsMana_holdNumber of shares held by management/total number of shares of the companyTop1Number of shares held by the largest shareholder/total number of shares of the companySizeNatural logarithm of total assets at the end of the yearLevTotal liabilities/total assetsROANet profit/average balance of total assetsInd_dumIndustry dummy variableYear_dumAnnual dummy variable


## 3.3. Model Design

This article adopts the PSM-DID analysis method, which is divided into two steps: the first step is divided into an experimental group and matched control group according to the determinant model. The decisive factor model for testing the impact of excessive defense of antitakeover provisions is adopted, and model (1) is as follows:(1)ATP_overi=α0+α1Boardit+α2IndDirRit+α3Mana_holdit+α4Top�1it+α5Sizeit+α6Levit+α7ROAit+∑​Yeart+∑​Industryi+εit.For companies with an excessive defense of antitakeover provisions, if the excessive defense of antitakeover provisions (ATP over) is set in the articles of association of listed companies in year t, the value from ATP overt to ATP overt + n is 1 and ATP overt − n is 0. For companies without the excessive defense of antitakeover provisions, ATP over is 0. Through model (1), it can test the impact of various factors in the model on the company when deciding whether to set excessive defense of antitakeover provisions.Through the determinant model, it can match to form the tendency score. For the whole sample period, a companyj in the control group without the excessive defense of antitakeover provision is found, which is as similar as possible to the determinant of the experimental group i with an excessive defense of antitakeover provisions, so that an effective control group with similar probability to the experimental group can be found, and applied to the follow-up test [32].The second step is to use the double difference method. This article uses the following model (2):(2)Consequencesi=β0+β1ATP−overi+β2Afterit+β3ATP−overi×Afterit+∑​Controlsit+∑​Yeart+∑​Industryi+εit.In model (2), the excessive defense of antitakeover provisions (ATP over) is a dummy variable. When the excessive defense of antitakeover provisions is set in the articles of association, the value is 1. When the excessive defense of antitakeover provisions is not set in the articles of association, the value is 0. After is a virtual variable. When the articles of association are set with an excessive defense of antitakeover provisions, the value is 1; otherwise, it is 0. For the control group, After is 1 in the same year after the experimental group companies with an excessive defense of antitakeover provisions are matched accordingly. ATP overi´Afterit indicates the difference between the experimental group and the control group before and after setting the excessive defense of antitakeover provisions. The explained variable (Consequence) represents enterprise value (Tobin’sQ), the first kind of agency cost (Cost1), the second kind of agency cost (Cost2), enterprise innovation input (RNDR), and enterprise innovation output (IPantent), respectively. In addition, the model controls the fixed effects of industries and years to eliminate the influencing factors of macroeconomy and specific industries.


## 4. Empirical Test

### 4.1. Descriptive Statistics and Correlation Analysis

Table3 shows the results of descriptive statistical analysis of the main variables. According to the identification criteria of excessive defense of antitakeover provisions, this article focuses on five types of excessive defense antitakeover provisions: shareholding ratio limit of director nomination right (SL over), time limit (TL over), director qualification examination (QE over), staggered board of directors (SB over), and golden parachute (GP over). Therefore, the excessive defense of antitakeover provision means that as long as any one or more of the above five provisions are set, the ATP over value is 1; otherwise, it is 0. It can be seen from Table 3 that the average number of ATP over is 5%, indicating that 5% of the listed companies in the sample of listed companies have set excessive defense of antitakeover provisions. The results of other variables are shown in Table 3.Table 3
Descriptive statistics.
VariablesNumber of observationsMean valueStandard deviationMinimum valueMedianMaximum valueTobin’s Q201442.422.180.221.7712.25COST1201440.180.130.010.150.78COST2201440.671.11-2.580.416.01RNDR201440.050.040.000.040.25IPantent2014414.0932.630.004.00237.00SL over201440.120.100.000.001.00TL over201440.010.050.000.001.00QE over201440.050.090.000.001.00SB over201440.010.100.000.001.00GP over201440.020.040.000.001.00ATP over201440.050.030.000.001.00Board201442.100.171.112.222.90IndDirR201440.380.050.190.340.81Mana hold201440.110.170.000.030.65Top1201440.340.150.080.320.76Size2014421.851.1819.9321.7125.70Lev201440.370.180.050.350.79ROA201440.060.05−0.070.050.19Table4 shows the Pearson correlation coefficients of the main variables. It can be seen from the results in Table 4 that although the correlation of the main variables is significant, the relative coefficient is small, which further verifies that there is no multicollinearity problem between the variables. However, the correlation coefficients between different types of antitakeover provisions may be different, which further verifies the uniqueness of antitakeover provisions.Table 4
Correlation Analysis of main variables.
VariablesTobin’s QCOST1COST2RNDRIPantentSL overTL overQE overSB overGP overATP overTobin’s Q1COST10.365∗∗∗1COST2−0.034∗∗∗-0.221∗∗∗1RNDR0.238∗∗∗0.242∗∗∗−0.034∗∗1IPatent0.004∗∗∗0.005∗∗∗−0.001∗0.007∗∗∗1SL over−0.012∗∗0.0200.017∗−0.003∗∗−0.012∗∗1TL over0.013∗∗0.0120.023∗0.002∗∗0.021∗∗0.094∗∗1QE over0.019∗∗0.0160.014∗0.003∗∗0.018∗∗0.212∗∗0.067∗∗∗1SB over−0.024∗∗0.0170.012∗−0.005∗∗−0.015∗∗0.121∗∗∗0.089∗∗∗0.065∗∗∗1GP over−0.017∗∗0.019∗∗0.017−0.007∗∗−0.011∗∗0.087∗∗∗0.102∗∗∗0.098∗∗∗0.086∗∗∗1ATP over−0.015∗∗0.022∗∗0.007−0.008∗∗−0.023∗∗0.312∗∗∗0.087∗∗∗0.096∗∗∗0.103∗∗∗0.092∗∗∗1Among them,SL over and SB over are negatively correlated with enterprise value and R&D input-output and positively correlated with the type 2 agency cost. TL over and QE over are positively correlated with enterprise value, R&D input-output, and the type 2 agency cost. The GP over is negatively correlated with enterprise value and R&D input-output and positively correlated with the first type of agency cost. This shows that the terms with the maintenance of the control of the board of directors as the core are mainly positively correlated with the type 2 agency cost, while the terms with the maintenance of management control as the core are mainly positively correlated with the type 1 agency cost. For the impact of enterprise value, the positive and negative effects of different antitakeover provisions are different, and the governance effects of antitakeover provisions will also be affected by each other. Therefore, this article makes an empirical test by setting the dummy variable ATP over. From the correlation analysis table of main variables in Table 4, it can be seen that the correlation coefficient between ATP over and Tobin’s Q is negative. Consistent with Hypothesis 1A proposed above, that is, setting excessive defense of antitakeover provisions in the articles of association will reduce the enterprise value.


### 4.2. Propensity Score Matching

According to the research design, this article conducts PSM analysis. The experimental group is the listed companies with an excessive defense of antitakeover provisions from 2007 to 2018, and the control group is the listed companies without the excessive defense of antitakeover provisions from 2007 to 2018. The propensity score is estimated through the regression model of model (1) and paired in a ratio of 1 : 3. The reliability requirements of PSM in pairing require that there is no significant difference in determinant variables between the matched experimental group and the control group. Therefore, this article first tests the balance of matched samples. Table 5 lists the balance test of matched samples. Compared with the relevant data of the experimental group and the control group before matching, the differences between the experimental group and the control group after matching are significantly reduced in the following table. Therefore, the decisive variables and matching methods selected in this article are correct, and the estimation results of the PSM matching method are reliable.Table 5
Balance test of matched samples.
VariablesBefore matchingAfter matchingExperience groupControl groupDifferenceExperience groupControl groupDifferenceBoard2.1182.128−0.012.1182.119−0.001IndDirR0.3730.3720.0010.3730.3730.0001Mana hold0.1240.1030.021∗0.1240.1220.002Top10.2710.364−0.093∗0.2710.2700.001Size21.83421.7800.05421.83421.8150.007Lev0.4260.441−0.015∗0.4260.432−0.006ROA0.0470.0400.0070.0470.050−0.003Table6 shows the regression results of the decisive factors of model (1). The results show that there is a significant positive correlation between the management shareholding ratio and the excessive defense of antitakeover provisions, and its actual coefficient is 2.121, which shows that the management shareholding ratio of listed companies with an excessive defense of antitakeover provisions is obviously high. The shareholding ratio of the first largest shareholder is significantly negatively correlated with the excessive defense of antitakeover provisions, and its actual coefficient is −5.532, which shows that the shareholding ratio of major shareholders of listed companies with excessive defense provisions is obviously low and the equity is relatively scattered. The leverage level is significantly negatively correlated with the excessive defense of antitakeover provisions, and its actual coefficient is −0.824, indicating that the asset-liability ratio of listed companies with excessive defense provisions is not high.Table 6
Decisive factor analysis model.
Variable designPrediction coefficientActual coefficientP ValueBoard?−0.0230.311IndDirR?0.2810.614Mana hold+2.121∗∗0.013Top1—−5.532∗0.001Size?0.0310.705Lev—−0.824∗0.092ROA?1.8320.235The outstanding characteristics of listed companies with an excessive defense of antitakeover provisions are low leverage and low shareholding ratio of major shareholders, indicating that listed companies with good operating performance and dispersed equity are more likely to be valued by the acquirer, and the risk of being acquired is greatly increased. In order to effectively reduce the risk of the hostile takeover, listed companies prefer to set antitakeover provisions with excessive defense in their articles of association. At the same time, listed companies with high management shareholding ratio are also more inclined to set antitakeover provisions with excessive defense in the articles of association to ensure the safety of the company’s control.


### 4.3. Double Difference Test

After being processed by the PSM method, this article uses the PSM-DID method to test model (2). The double difference model controls the fixed effects of industry and year. Table 7 lists the panel DID results of model (2), in which the difference between columns (1), (3), (5), (7), (9) and columns (2), (4), (6), (8) and (10) is mainly reflected in the regression results of whether to add control variables.Table 7
Analysis of DID regression results of setting antitakeover provisions with excessive defense.
VariablesTobin’s QCOST1COST2RNDRIPantent(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)ATP over0.2320.354−0.019−0.018−0.243∗∗−0.144∗∗∗0.0250.0180.0020.001(1.21)(1.33)(−1.11)(−0.99)(−2.43)(−2.77)(1.47)(1.08)(1.44)(1.01)After0.1650.087−0.004−0.011−0.065−0.078−0.004−0.014−0.001−0.001(0.89)(0.55)(−0.30)(−1.01)(−0.68)(−1.51)(−0.56)(−0.68)(−0.34)(−0.56)ATP over´ After−0.543∗∗−0.507∗∗0.025∗0.007∗0.251∗∗0.132∗−0.019−0.012−0.002−0.001(−2.20)(−2.01)(1.75)(1.87)(2.21)(1.76)(−0.89)(−0.77)(−0.88)(−0.69)Board0.0060.003−0.021∗∗∗−0.011∗∗−0.001∗∗(0.37)(0.91)(−4.14)(−2.04)(−2.11)IndDirR−0.5410.036−0.2110.0120.001(−0.99)(0.80)(−1.16)(0.22)(0.22)Mana hold0.1320.0230.3410.0150.003(0.45)(0.87)(0.45)(0.43)(0.56)Top1−0.281−0.084∗0.745∗0.0130.004(−0.75)(−1.62)(1.88)(0.83)(0.85)Size0.0840.0110.271∗∗∗0.0110.001(0.75)(1.22)(5.12)(1.02)(1.13)Lev−2.101∗∗−0.177∗∗∗−0.133−0.011∗∗∗−0.010∗∗∗(−2.57)(−5.87)(−1.12)(−4.55)(−4.12)ROA2.253−0.2653.126∗∗∗0.035∗∗0.031∗∗(1.34)(−0.87)(5.67)(2.58)(3.11)Constant3.315∗∗∗4.711∗∗∗−0.157∗∗∗−0.081−0.431−4.122∗∗∗0.015∗0.0140.5420.327(10.54)(3.75)(−10.11)(−0.66)(−1.03)(−5.11)(1.43)(0.57)(0.91)(0.43)IndustryYESYESYESYESYESYESYESYESYESYESYearYESYESYESYESYESYESYESYESYESYESN2587251425872514258725142587251425872514Adj.R20.170.280.120.180.090.200.220.280.210.19Note.∗∗∗, ∗∗, and ∗ indicate significance at the confidence level of 1%, 5%, and 10%, respectively.Columns (1) and (2) mainly test the impact of excessive defense of antitakeover provisions on enterprise value. In column (2), the regression coefficient of the multiplication termATP over´After is −0.507, which is significant at the statistical level of 5%, which indicates that compared with the company without the excessive defense of antitakeover provisions, the enterprise value with an excessive defense of antitakeover provisions is significantly reduced, thus verifying Hypothesis 1a; that is, setting antitakeover provisions with excessive defense in the articles of association will reduce the enterprise value. Columns (3) and (4) mainly test the impact of excessive defense of antitakeover provisions on the type 1 agency cost. In column (4), the regression coefficient of the multiplication term ATP over´After is 0.007, which is significant at the statistical level of 10%, which verifies Hypothesis 2a; that is, the excessive defense of antitakeover provisions effectively protects the position of the management, invalidates the role of supervision and governance for the management, and increases the type 1 agency cost. Columns (5) and (6) mainly test the impact of excessive defense of antitakeover provisions on the type 2 agency cost. In column (6), the regression coefficient of the multiplication term ATP over´After is 0.132, which is significant at the statistical level of 10%, thus verifying Hypothesis 2b, that is, setting antitakeover provisions with excessive defense in the articles of association will increase the type 2 agency cost and greatly increase the tunneling probability of major shareholders. Columns (7) and (8) mainly test the impact of excessive defense of antitakeover provisions on enterprise innovation investment. In columns (7) and (8), the regression coefficients of ATP over´After are −0.019 and −0.012, respectively, but they are not significant. Columns (9) and (10) mainly test the impact of excessive defense of antitakeover provisions on enterprise innovation output. In columns (9) and (10), the regression coefficients of the cross multiplication term ATP over´After are −0.002 and −0.001, respectively. This further verifies that the antitakeover provisions with excessive defense have no significant value effect on the long-term innovation of enterprises [34].From the perspective of control variables, the regression coefficient ofBoard is significantly negative in column (6), indicating that with the increase in the number of directors, an effective supervision mechanism to restrict the tunneling behavior of controlling shareholders can be better established. The regression coefficient of Top1 is significantly negative in column (4) and significantly positive in column (6), indicating that the shareholding ratio of controlling shareholders has a negative correlation with the type 1 agency cost, while it has a positive correlation with the type 2 agency cost, indicating that the controlling shareholders have played a positive supervisory role for the management but failed to effectively inhibit the tunneling behavior of major shareholders. The regression coefficient of ROA is significantly positive in columns (8) and (10), indicating that enterprises with higher income levels are willing to invest more funds in R&D investment, and the long-term value of enterprises can increase.To sum up, setting antitakeover provisions with excessive defense in the articles of association has significantly reduced the enterprise value. Hypothesis 1a, Hypothesis 2a, and Hypothesis 2b have been effectively verified, and the trench hypothesis and agency path have been confirmed. This shows that the setting of antitakeover provisions with excessive defense by listed companies not only exceeds its judicial recognition standards in terms of law but also brings the loss of long-term value of enterprises in terms of economic consequences, which verifies the value loss caused by the increase of two types of agency costs.


### 4.4. Robustness Test

In order to prove the robustness of the above results, this article uses the nomination right provisions of director candidates, including three types of antitakeover provisions with excessive defense: shareholding ratio limit (SL over), shareholding time limit (TL over), and director qualification review (QE over) as alternative variables. This article tests the differences and changes in the relevant economic consequence variables represented by enterprise value before and after setting the director candidate nomination right provisions with excessive defense. The specific robustness results are shown in Table 8.Table 8
Analysis of DID regression results of setting the terms of nomination right of director candidates.
VariablesTobin’s QCOST1COST2RNDRIPantent(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)ATP over0.3420.241−0.021−0.016−0.213∗−0.167∗0.0210.0100.0030.002(1.27)(1.01)(−1.05)(−0.87)(−1.85)(−1.89)(1.23)(1.06)(1.33)(1.12)After0.2110.120−0.005−0.016−0.078−0.122−0.011−0.025−0.001−0.001(1.10)(0.67)(−0.30)(−0.11)(−0.87)(−1.41)(−0.76)(−0.86)(−0.35)(−0.65)ATP over´ After−0.573∗∗−0.461∗∗0.0210.0080.257∗∗0.168∗−0.021−0.017−0.003−0.002(−2.27)(−2.27)(1.15)(1.04)(2.05)(1.65)(−0.98)(−0.87)(−0.78)(−0.66)Board0.0140.002−0.012−0.013∗∗−0.001(0.77)(0.88)(−1.14)(−2.14)(−1.17)IndDirR−1.11∗0.057−0.8010.0130.002(−1.78)(0.85)(−1.31)(0.24)(0.21)Mana hold0.1210.0320.3440.0210.002(0.32)(0.84)(0.47)(0.34)(0.51)Top1−0.281−0.124∗0.998∗0.0150.004(−0.55)(−1.72)(1.98)(0.98)(0.81)Size0.0870.007−0.011∗0.0150.001(0.85)(1.22)(−1.72)(1.12)(1.02)Lev−3.011∗∗−0.207∗∗∗0.253−0.012∗∗∗−0.010∗∗∗(−2.57)(−5.48)(1.57)(−3.45)(−3.23)ROA2.753−0.4256.132∗∗∗0.041∗∗0.030∗∗(1.44)(−0.87)(8.72)(2.87)(2.76)Constant3.655∗∗∗3.511∗−0.166∗∗∗−0.081∗−0.427−2.722∗∗∗0.011∗0.0150.5420.370(12.54)(1.75)(−7.11)(−1.66)(−1.12)(−4.96)(1.45)(0.75)(0.91)(0.41)IndustryYESYESYESYESYESYESYESYESYESYESYearYESYESYESYESYESYESYESYESYESYESN1978190619781906197819061978190619781906Adj.R20.200.270.110.170.060.160.200.210.190.17Note.∗∗∗, ∗∗, and ∗ indicate significance at the confidence level of 1%, 5%, and 10%, respectively.It can be seen from Table8 that setting the provisions on the nomination right of over defensive director candidates will still reduce the enterprise value, and the type 2 agency cost will increase significantly, but the coefficient of the type 1 agency cost is not significant, which may only increase the type 2 agency cost because such provisions are more to safeguard the interests of controlling shareholders. It has no significant impact on the type 1 agency cost. The coefficients of R&D input and R&D output are still not significant, indicating that the original conclusion is still valid after replacing the original measurement method of antitakeover provisions with excessive defense. The sign direction and significance of the regression coefficient are not significantly different from the previous results. In conclusion, the research results are relatively robust.


## 4.1. Descriptive Statistics and Correlation Analysis

Table3 shows the results of descriptive statistical analysis of the main variables. According to the identification criteria of excessive defense of antitakeover provisions, this article focuses on five types of excessive defense antitakeover provisions: shareholding ratio limit of director nomination right (SL over), time limit (TL over), director qualification examination (QE over), staggered board of directors (SB over), and golden parachute (GP over). Therefore, the excessive defense of antitakeover provision means that as long as any one or more of the above five provisions are set, the ATP over value is 1; otherwise, it is 0. It can be seen from Table 3 that the average number of ATP over is 5%, indicating that 5% of the listed companies in the sample of listed companies have set excessive defense of antitakeover provisions. The results of other variables are shown in Table 3.Table 3
Descriptive statistics.
VariablesNumber of observationsMean valueStandard deviationMinimum valueMedianMaximum valueTobin’s Q201442.422.180.221.7712.25COST1201440.180.130.010.150.78COST2201440.671.11-2.580.416.01RNDR201440.050.040.000.040.25IPantent2014414.0932.630.004.00237.00SL over201440.120.100.000.001.00TL over201440.010.050.000.001.00QE over201440.050.090.000.001.00SB over201440.010.100.000.001.00GP over201440.020.040.000.001.00ATP over201440.050.030.000.001.00Board201442.100.171.112.222.90IndDirR201440.380.050.190.340.81Mana hold201440.110.170.000.030.65Top1201440.340.150.080.320.76Size2014421.851.1819.9321.7125.70Lev201440.370.180.050.350.79ROA201440.060.05−0.070.050.19Table4 shows the Pearson correlation coefficients of the main variables. It can be seen from the results in Table 4 that although the correlation of the main variables is significant, the relative coefficient is small, which further verifies that there is no multicollinearity problem between the variables. However, the correlation coefficients between different types of antitakeover provisions may be different, which further verifies the uniqueness of antitakeover provisions.Table 4
Correlation Analysis of main variables.
VariablesTobin’s QCOST1COST2RNDRIPantentSL overTL overQE overSB overGP overATP overTobin’s Q1COST10.365∗∗∗1COST2−0.034∗∗∗-0.221∗∗∗1RNDR0.238∗∗∗0.242∗∗∗−0.034∗∗1IPatent0.004∗∗∗0.005∗∗∗−0.001∗0.007∗∗∗1SL over−0.012∗∗0.0200.017∗−0.003∗∗−0.012∗∗1TL over0.013∗∗0.0120.023∗0.002∗∗0.021∗∗0.094∗∗1QE over0.019∗∗0.0160.014∗0.003∗∗0.018∗∗0.212∗∗0.067∗∗∗1SB over−0.024∗∗0.0170.012∗−0.005∗∗−0.015∗∗0.121∗∗∗0.089∗∗∗0.065∗∗∗1GP over−0.017∗∗0.019∗∗0.017−0.007∗∗−0.011∗∗0.087∗∗∗0.102∗∗∗0.098∗∗∗0.086∗∗∗1ATP over−0.015∗∗0.022∗∗0.007−0.008∗∗−0.023∗∗0.312∗∗∗0.087∗∗∗0.096∗∗∗0.103∗∗∗0.092∗∗∗1Among them,SL over and SB over are negatively correlated with enterprise value and R&D input-output and positively correlated with the type 2 agency cost. TL over and QE over are positively correlated with enterprise value, R&D input-output, and the type 2 agency cost. The GP over is negatively correlated with enterprise value and R&D input-output and positively correlated with the first type of agency cost. This shows that the terms with the maintenance of the control of the board of directors as the core are mainly positively correlated with the type 2 agency cost, while the terms with the maintenance of management control as the core are mainly positively correlated with the type 1 agency cost. For the impact of enterprise value, the positive and negative effects of different antitakeover provisions are different, and the governance effects of antitakeover provisions will also be affected by each other. Therefore, this article makes an empirical test by setting the dummy variable ATP over. From the correlation analysis table of main variables in Table 4, it can be seen that the correlation coefficient between ATP over and Tobin’s Q is negative. Consistent with Hypothesis 1A proposed above, that is, setting excessive defense of antitakeover provisions in the articles of association will reduce the enterprise value.


## 4.2. Propensity Score Matching

According to the research design, this article conducts PSM analysis. The experimental group is the listed companies with an excessive defense of antitakeover provisions from 2007 to 2018, and the control group is the listed companies without the excessive defense of antitakeover provisions from 2007 to 2018. The propensity score is estimated through the regression model of model (1) and paired in a ratio of 1 : 3. The reliability requirements of PSM in pairing require that there is no significant difference in determinant variables between the matched experimental group and the control group. Therefore, this article first tests the balance of matched samples. Table 5 lists the balance test of matched samples. Compared with the relevant data of the experimental group and the control group before matching, the differences between the experimental group and the control group after matching are significantly reduced in the following table. Therefore, the decisive variables and matching methods selected in this article are correct, and the estimation results of the PSM matching method are reliable.Table 5
Balance test of matched samples.
VariablesBefore matchingAfter matchingExperience groupControl groupDifferenceExperience groupControl groupDifferenceBoard2.1182.128−0.012.1182.119−0.001IndDirR0.3730.3720.0010.3730.3730.0001Mana hold0.1240.1030.021∗0.1240.1220.002Top10.2710.364−0.093∗0.2710.2700.001Size21.83421.7800.05421.83421.8150.007Lev0.4260.441−0.015∗0.4260.432−0.006ROA0.0470.0400.0070.0470.050−0.003Table6 shows the regression results of the decisive factors of model (1). The results show that there is a significant positive correlation between the management shareholding ratio and the excessive defense of antitakeover provisions, and its actual coefficient is 2.121, which shows that the management shareholding ratio of listed companies with an excessive defense of antitakeover provisions is obviously high. The shareholding ratio of the first largest shareholder is significantly negatively correlated with the excessive defense of antitakeover provisions, and its actual coefficient is −5.532, which shows that the shareholding ratio of major shareholders of listed companies with excessive defense provisions is obviously low and the equity is relatively scattered. The leverage level is significantly negatively correlated with the excessive defense of antitakeover provisions, and its actual coefficient is −0.824, indicating that the asset-liability ratio of listed companies with excessive defense provisions is not high.Table 6
Decisive factor analysis model.
Variable designPrediction coefficientActual coefficientP ValueBoard?−0.0230.311IndDirR?0.2810.614Mana hold+2.121∗∗0.013Top1—−5.532∗0.001Size?0.0310.705Lev—−0.824∗0.092ROA?1.8320.235The outstanding characteristics of listed companies with an excessive defense of antitakeover provisions are low leverage and low shareholding ratio of major shareholders, indicating that listed companies with good operating performance and dispersed equity are more likely to be valued by the acquirer, and the risk of being acquired is greatly increased. In order to effectively reduce the risk of the hostile takeover, listed companies prefer to set antitakeover provisions with excessive defense in their articles of association. At the same time, listed companies with high management shareholding ratio are also more inclined to set antitakeover provisions with excessive defense in the articles of association to ensure the safety of the company’s control.


## 4.3. Double Difference Test

After being processed by the PSM method, this article uses the PSM-DID method to test model (2). The double difference model controls the fixed effects of industry and year. Table 7 lists the panel DID results of model (2), in which the difference between columns (1), (3), (5), (7), (9) and columns (2), (4), (6), (8) and (10) is mainly reflected in the regression results of whether to add control variables.Table 7
Analysis of DID regression results of setting antitakeover provisions with excessive defense.
VariablesTobin’s QCOST1COST2RNDRIPantent(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)ATP over0.2320.354−0.019−0.018−0.243∗∗−0.144∗∗∗0.0250.0180.0020.001(1.21)(1.33)(−1.11)(−0.99)(−2.43)(−2.77)(1.47)(1.08)(1.44)(1.01)After0.1650.087−0.004−0.011−0.065−0.078−0.004−0.014−0.001−0.001(0.89)(0.55)(−0.30)(−1.01)(−0.68)(−1.51)(−0.56)(−0.68)(−0.34)(−0.56)ATP over´ After−0.543∗∗−0.507∗∗0.025∗0.007∗0.251∗∗0.132∗−0.019−0.012−0.002−0.001(−2.20)(−2.01)(1.75)(1.87)(2.21)(1.76)(−0.89)(−0.77)(−0.88)(−0.69)Board0.0060.003−0.021∗∗∗−0.011∗∗−0.001∗∗(0.37)(0.91)(−4.14)(−2.04)(−2.11)IndDirR−0.5410.036−0.2110.0120.001(−0.99)(0.80)(−1.16)(0.22)(0.22)Mana hold0.1320.0230.3410.0150.003(0.45)(0.87)(0.45)(0.43)(0.56)Top1−0.281−0.084∗0.745∗0.0130.004(−0.75)(−1.62)(1.88)(0.83)(0.85)Size0.0840.0110.271∗∗∗0.0110.001(0.75)(1.22)(5.12)(1.02)(1.13)Lev−2.101∗∗−0.177∗∗∗−0.133−0.011∗∗∗−0.010∗∗∗(−2.57)(−5.87)(−1.12)(−4.55)(−4.12)ROA2.253−0.2653.126∗∗∗0.035∗∗0.031∗∗(1.34)(−0.87)(5.67)(2.58)(3.11)Constant3.315∗∗∗4.711∗∗∗−0.157∗∗∗−0.081−0.431−4.122∗∗∗0.015∗0.0140.5420.327(10.54)(3.75)(−10.11)(−0.66)(−1.03)(−5.11)(1.43)(0.57)(0.91)(0.43)IndustryYESYESYESYESYESYESYESYESYESYESYearYESYESYESYESYESYESYESYESYESYESN2587251425872514258725142587251425872514Adj.R20.170.280.120.180.090.200.220.280.210.19Note.∗∗∗, ∗∗, and ∗ indicate significance at the confidence level of 1%, 5%, and 10%, respectively.Columns (1) and (2) mainly test the impact of excessive defense of antitakeover provisions on enterprise value. In column (2), the regression coefficient of the multiplication termATP over´After is −0.507, which is significant at the statistical level of 5%, which indicates that compared with the company without the excessive defense of antitakeover provisions, the enterprise value with an excessive defense of antitakeover provisions is significantly reduced, thus verifying Hypothesis 1a; that is, setting antitakeover provisions with excessive defense in the articles of association will reduce the enterprise value. Columns (3) and (4) mainly test the impact of excessive defense of antitakeover provisions on the type 1 agency cost. In column (4), the regression coefficient of the multiplication term ATP over´After is 0.007, which is significant at the statistical level of 10%, which verifies Hypothesis 2a; that is, the excessive defense of antitakeover provisions effectively protects the position of the management, invalidates the role of supervision and governance for the management, and increases the type 1 agency cost. Columns (5) and (6) mainly test the impact of excessive defense of antitakeover provisions on the type 2 agency cost. In column (6), the regression coefficient of the multiplication term ATP over´After is 0.132, which is significant at the statistical level of 10%, thus verifying Hypothesis 2b, that is, setting antitakeover provisions with excessive defense in the articles of association will increase the type 2 agency cost and greatly increase the tunneling probability of major shareholders. Columns (7) and (8) mainly test the impact of excessive defense of antitakeover provisions on enterprise innovation investment. In columns (7) and (8), the regression coefficients of ATP over´After are −0.019 and −0.012, respectively, but they are not significant. Columns (9) and (10) mainly test the impact of excessive defense of antitakeover provisions on enterprise innovation output. In columns (9) and (10), the regression coefficients of the cross multiplication term ATP over´After are −0.002 and −0.001, respectively. This further verifies that the antitakeover provisions with excessive defense have no significant value effect on the long-term innovation of enterprises [34].From the perspective of control variables, the regression coefficient ofBoard is significantly negative in column (6), indicating that with the increase in the number of directors, an effective supervision mechanism to restrict the tunneling behavior of controlling shareholders can be better established. The regression coefficient of Top1 is significantly negative in column (4) and significantly positive in column (6), indicating that the shareholding ratio of controlling shareholders has a negative correlation with the type 1 agency cost, while it has a positive correlation with the type 2 agency cost, indicating that the controlling shareholders have played a positive supervisory role for the management but failed to effectively inhibit the tunneling behavior of major shareholders. The regression coefficient of ROA is significantly positive in columns (8) and (10), indicating that enterprises with higher income levels are willing to invest more funds in R&D investment, and the long-term value of enterprises can increase.To sum up, setting antitakeover provisions with excessive defense in the articles of association has significantly reduced the enterprise value. Hypothesis 1a, Hypothesis 2a, and Hypothesis 2b have been effectively verified, and the trench hypothesis and agency path have been confirmed. This shows that the setting of antitakeover provisions with excessive defense by listed companies not only exceeds its judicial recognition standards in terms of law but also brings the loss of long-term value of enterprises in terms of economic consequences, which verifies the value loss caused by the increase of two types of agency costs.


## 4.4. Robustness Test

In order to prove the robustness of the above results, this article uses the nomination right provisions of director candidates, including three types of antitakeover provisions with excessive defense: shareholding ratio limit (SL over), shareholding time limit (TL over), and director qualification review (QE over) as alternative variables. This article tests the differences and changes in the relevant economic consequence variables represented by enterprise value before and after setting the director candidate nomination right provisions with excessive defense. The specific robustness results are shown in Table 8.Table 8
Analysis of DID regression results of setting the terms of nomination right of director candidates.
VariablesTobin’s QCOST1COST2RNDRIPantent(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)ATP over0.3420.241−0.021−0.016−0.213∗−0.167∗0.0210.0100.0030.002(1.27)(1.01)(−1.05)(−0.87)(−1.85)(−1.89)(1.23)(1.06)(1.33)(1.12)After0.2110.120−0.005−0.016−0.078−0.122−0.011−0.025−0.001−0.001(1.10)(0.67)(−0.30)(−0.11)(−0.87)(−1.41)(−0.76)(−0.86)(−0.35)(−0.65)ATP over´ After−0.573∗∗−0.461∗∗0.0210.0080.257∗∗0.168∗−0.021−0.017−0.003−0.002(−2.27)(−2.27)(1.15)(1.04)(2.05)(1.65)(−0.98)(−0.87)(−0.78)(−0.66)Board0.0140.002−0.012−0.013∗∗−0.001(0.77)(0.88)(−1.14)(−2.14)(−1.17)IndDirR−1.11∗0.057−0.8010.0130.002(−1.78)(0.85)(−1.31)(0.24)(0.21)Mana hold0.1210.0320.3440.0210.002(0.32)(0.84)(0.47)(0.34)(0.51)Top1−0.281−0.124∗0.998∗0.0150.004(−0.55)(−1.72)(1.98)(0.98)(0.81)Size0.0870.007−0.011∗0.0150.001(0.85)(1.22)(−1.72)(1.12)(1.02)Lev−3.011∗∗−0.207∗∗∗0.253−0.012∗∗∗−0.010∗∗∗(−2.57)(−5.48)(1.57)(−3.45)(−3.23)ROA2.753−0.4256.132∗∗∗0.041∗∗0.030∗∗(1.44)(−0.87)(8.72)(2.87)(2.76)Constant3.655∗∗∗3.511∗−0.166∗∗∗−0.081∗−0.427−2.722∗∗∗0.011∗0.0150.5420.370(12.54)(1.75)(−7.11)(−1.66)(−1.12)(−4.96)(1.45)(0.75)(0.91)(0.41)IndustryYESYESYESYESYESYESYESYESYESYESYearYESYESYESYESYESYESYESYESYESYESN1978190619781906197819061978190619781906Adj.R20.200.270.110.170.060.160.200.210.190.17Note.∗∗∗, ∗∗, and ∗ indicate significance at the confidence level of 1%, 5%, and 10%, respectively.It can be seen from Table8 that setting the provisions on the nomination right of over defensive director candidates will still reduce the enterprise value, and the type 2 agency cost will increase significantly, but the coefficient of the type 1 agency cost is not significant, which may only increase the type 2 agency cost because such provisions are more to safeguard the interests of controlling shareholders. It has no significant impact on the type 1 agency cost. The coefficients of R&D input and R&D output are still not significant, indicating that the original conclusion is still valid after replacing the original measurement method of antitakeover provisions with excessive defense. The sign direction and significance of the regression coefficient are not significantly different from the previous results. In conclusion, the research results are relatively robust.


## 5. Further Analysis

In the previous study, we verified the impact of excessive defense of antitakeover provisions on agency costs. The study found that listed companies with excessive defense antitakeover provisions not only significantly increase the type 1 agency costs but also increase the type 2 agency costs. In view of the simultaneous occurrence of the management trench problem and the controlling shareholder trench problem, it should further analyze whether the controlling shareholder will collude with the management to realize its “Tunnel” effect.In the market economy environment, the salary level of the management is closely related to the real performance level of the enterprise. The management will strictly resist the private interest behavior of the controlling shareholders out of consideration of its own salary level. At the same time, the tunneling behavior of the controlling shareholder will also have a negative impact on the reputation of the listed company and further consume the personal career reputation of the company’s management. Therefore, the management generally does not cooperate with the interest mining behavior of the controlling shareholder for the dual consideration of salary and reputation. However, the controlling shareholders may choose the way of joint management to realize their tunneling behavior, mainly through the following two forms. The first is to reduce the risk that the management is involved and reduce the correlation between the management’s salary and performance. The management does not have to worry about the impact of the company’s performance on its salary. The second is to improve the stability of management positions, reduce the risk of management replacement, and reduce the relevance of management to professional performance.Based on the above analysis, we test the relationship between setting antitakeover provisions with excessive defense in the articles of association and the correlation between management compensation and performance. In this article, the natural logarithm of the average salary of the top three executives with the highest salary level and directors, supervisors, and senior managers is used as the measurement index of management salary performance, which is expressed asExecomp and Dsecomp, respectively. It can be seen from columns (1) and (2) of Table 9 that the multiplier coefficient of the variable ATP over´ ROA is significantly negative in the model, indicating that compared with the listed companies without the excessive defense of antitakeover provisions, the listed companies with an excessive defense of antitakeover provisions have a lower level of salary performance relevance of their management. The relationship between the setting of antitakeover provisions with excessive defense in the articles of association and the correlation between management’s professional performances are further investigated. The CEO change is used as the measurement index of management turnover, and the control variables include executive education, age, tenure, and other company characteristics. It can be seen from column (3) of Table 9 that the multiplier coefficient of the variable ATP over´ ROA is significantly positive, which shows that in listed companies with an excessive defense of antitakeover provisions, the possibility of CEO replacement due to poor corporate performance is relatively small, and the correlation level of CEO’s resignation performance is relatively low. Through the analysis of the above regression results, the listed companies that set excessive defense of antitakeover provisions in the articles of association not only have the tunneling behavior of the controlling shareholders but also show the increase of the second kind of agency cost and the further reduction of the level of correlation between management compensation and performance and the level of correlation between turnover performance. It also proves that the controlling shareholders are more likely to collude with the management, which aggravates the agency problem.Table 9
Regression result analysis of salary performance relevance and resignation performance relevance.
VariablesExecompDsecompCEO change(1)(2)(3)ATP over−0.021−0.0010.140∗∗∗(−0.56)(−0.04)(3.81)ATP over´ ROA−0.732∗∗∗−0.720∗∗∗1.617∗∗∗(−2.88)(−2.98)(3.89)ROA1.302∗∗∗1.317∗∗∗−1.879∗∗∗(5.12)(5.13)(−4.99)Size0.351∗∗∗0.361∗∗∗0.053∗∗∗(13.11)(12.89)(3.51)Fage0.0110.0210.043(0.36)(0.77)(1.12)TOP10.0020.002−0.003∗∗(1.26)(1.21)(−2.71)Institution0.007∗∗∗0.005∗∗−0.002(2.66)(2.44)(−1.20)LEV−0.081∗−0.052∗0.033(−1.78)(−1.78)(0.66)Board0.033∗∗∗0.027∗∗∗−0.005(4.12)(4.17)(−0.33)IndDirR0.3510.3060.277(1.55)(1.12)(0.76)Education−0.029∗∗(−1.99)Age0.012∗∗∗(3.98)Tenure−0.212∗∗∗(−7.81)Duality−0.081∗∗∗(−3.12)Constant3.112∗∗∗4.023∗∗∗−1.691∗∗(5.51)(4.12)(−2.22)IndustryYESYESYESYearYESYESYESN250221782076Adj.R20.370.310.18


## 6. Research Conclusion

Taking the A-share listed companies in Shanghai and Shenzhen stock markets from 2007 to 2018 as a sample, based on the construction of excessive defense index of antitakeover provisions (ATP over), and relying on the “quasi-natural experiment” method of PSM-DID, this article focuses on the impact of excessive defense of antitakeover provisions on enterprise value and its impact path analysis. The results show that excessive defense of antitakeover provisions will reduce enterprise value, and its impact path is realized by increasing the type 1 agency cost and the type 2 agency cost. By manually collecting the shareholders’ suggestion letter of the Investment Service Center, the amendment announcement of the articles of association of the listed companies and the relevant laws and regulations, this paper determines the identification standard of the excessive defense of the antiacquisition provisions. Further analysis found that listed companies with the excessive defense of antitakeover provisions in the articles of association also further reduced the correlation between management compensation and performance and the correlation between management and professional performance, indicating that not only the controlling shareholders have tunneling behavior but also the controlling shareholders are more likely to collude with the management to aggravate the agency problem. The comprehensive practical results show that the excessive defense of antitakeover provisions will enhance the double trench effect and eventually damage the enterprise value.At present, China has not set up special laws and regulations to strictly regulate the legal effect of antitakeover provisions. Based on the dual perspectives of law and economy, and on the basis of defining the legal effect of antitakeover provisions, this article studies the impact of excessive defense of antitakeover provisions on enterprise value, which provides strong practical support for legislators and regulators to deeply think about the legal effect of antitakeover provisions. It is conducive for regulators to carry out reasonable legal framework supervision on antitakeover provisions, give full play to the positive effects of antitakeover provisions, and abandon the management inertia caused by excessive defense, so as to realize the final growth of enterprise value. In the current capital market environment, the regulatory authorities should, within the legal framework, strictly supervise the behavior of listed companies in revising the articles of association and joining the antiacquisition clause, and strengthen the protection of the interests of small and medium investors, in order to maximize the positive role of the antiacquisition clause.



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*Source: 2970335-2022-09-14.xml*