Research On The Impact Of Performance Compensation Commitment On Goodwill Impairment Risk

With the development of economic globalization and capital market,M & A has become the main way for many enterprises to expand their scale,diversify their operation and enhance their competitiveness.In addition,with the continuous introduction and improvement of various policies,there has been a wave of M & A in China.Due to the scarcity of high-quality enterprises in the market,the shortage of supply and the risk of asymmetric information in the trading market,the transaction consideration paid by Listed Companies in M & A is seriously high,followed by the rising risk of goodwill impairment.In order to control the loss of goodwill impairment,enterprises introduce performance compensation commitment in the process of M & A,which is merged by the acquired party After the purchase,we should make a commitment to improve the efficiency of the transaction and promote the fairness of the transaction.In view of the false high premium in M & a market,China Securities Regulatory Commission(CSRC)has issued the measures for the management of major asset restructuring of listed companies,which requires both parties involved in M & A to sign performance compensation agreement.From this point of view,listed companies and regulators hope that the CSRC will force them to sign performance compensation commitments to curb the crazily high M & a premium,so as to avoid the generation of high goodwill and prevent the risk of goodwill impairment.However,according to the statistics of business week,the failure rate of M & A is 75%,and the failure rate of performance compensation commitment is 65%.According to the data of China Securities Regulatory Commission,the period from 2013 to 2015 is the peak period of mergers and acquisitions of enterprises in China.However,from 2016 to2018,when the three-year term of performance commitment expires,the realization of performance commitment is not optimistic.Enterprises withdraw a large amount of goodwill impairment,accompanied by various disputes,arbitration and litigation,resulting in performance diving,bringing huge economic losses to shareholders,and the shadow of goodwill explosion continues to cage The capital market.Domestic enterprises generally face the problem of "three highs" in M & A transactions,and performance commitment is widely used in M & A transactions because of its role of interest protection,which is closely related to high premium and high goodwill.Therefore,it is necessary to explore whether performance compensation commitment reduces or increases the risk of goodwill impairment,and whether performance commitment is signed It can really reduce the risk of goodwill impairment.How to better reduce the risk of goodwill impairment and protect the interests of both sides through the setting and performance of performance compensation commitments needs further study.This paper selects Huanghe whirlwind’s merger and acquisition of Shanghai Mingjiang as a case study,and finds that performance commitment seems to be an interest protection mechanism,but in fact it is not.Performance commitment represents the target enterprise’s management’s high confidence in its own profitability and development prospects,which makes the acquirer willing to pay a high price for it.In addition to the impact of income method and information asymmetry,performance compensation commitment is the most important factor On the contrary,Nuo has become the driving force behind the risk of goodwill impairment.The case analysis part of this paper analyzes the economic consequences of M& A and the causes of the economic consequences.In the financial analysis,it is found that the solvency of Huanghe whirlwind decreases after M & A,and the profitability,operation ability and other indicators first improve for a short time,and then decline all the way.Through the short-term performance research after the loss of performance commitment,it is found that once the performance commitment agreement is lost,it will lead to a decline The interests of the company and shareholders are seriously damaged,which sounds an alarm for the enterprises blindly pursuing merger and reorganization.Finally,through the case study,this paper puts forward some feasible suggestions for the enterprises in China’s M & a market from the perspectives of the acquirer,the acquiree and the regulator,so as to protect the interests of small and medium shareholders and create a more fair and rational market environment.