Research On The Decision Motivations And Economic Consequences Of Performance Compensation Commitment In Major Asset Reorganizations

With the continuous development of the capital market and the improvement of relevant laws and regulations,mergers and acquisitions have not only become an important way to integrate and upgrade the industrial structure,but also an important means for enterprises to carry out strategic layout and exchange blood.Mergers and acquisitions have had a profound impact on the capital market both in terms of quantity and amount,especially major asset restructuring events in mergers and acquisitions.According to existing statistics,major asset reorganizations occur frequently,but the failure rate is extremely high.In order to further protect the rights and interests of investors,reduce the risk of mergers and acquisitions,and increase the success rate of mergers and acquisitions and reorganizations at the stage of reaching an agreement and subsequent implementation processes,the China Securities Regulatory Commission in2008 revised the "Administrative Measures for the Major Asset Restructuring of Listed Companies"(hereinafter referred to as the "Administrative Measures")and added the relevant regulations on performance compensation commitments.However,it was not uncommon for companies to fail to meet standards,fail to fulfill their promises,and even file court cases.Whether performance compensation promises can play a role in regulating enterprise valuation and protecting investors’ rights and interests depends on whether the target enterprise ultimately achieves the promised goal set at the beginning.Therefore,considering the performance compensation commitments reached between companies during mergers and reorganizations,in-depth commitment to the specific setting itself,and examining the economic consequences of this mechanism are of great significance to stabilizing the order of the capital market.This article follows the research context of "motivation-behavior-consequence".Before analyzing the economic consequences of performance compensation commitments,it first focuses on the incentives for decision-making of the mechanism,and considers which mergers and acquisitions characteristics or corporate characteristics are more likely to sign the mechanism.On this basis,this article attempts to observe the economic consequences of performance compensation commitments from two perspectives based on the settings of gambling terms,namely market reaction and performance realization.The market response can timely capture the performance compensation promises "in the eyes" of investors,and the final performance realization is the "realistic" performance compensation promise.Taking into account the existence of information asymmetry and other factors and comparing the possible gaps between the two,strive to truly show the valuation adjustment mechanism used in the M&A market to all stakeholders.Finally,based on foreign experience and reference,several suggestions are put forward for the continuous improvement of performance compensation commitments,trying to make some contributions in strengthening market supervision and reducing investor risks.The main conclusions of this article are as follows:(1)Combined with the implementation of the new policy in 2014,from the perspectives of asset purchasers and asset sellers,and based on the interpretation of transaction cost theory,information asymmetry theory and game theory,this article provides an in-depth analysis of the motivations that influence the decision-making mechanism.The empirical research found that cross-border mergers and acquisitions,state-owned enterprise mergers and acquisitions,asset purchasers’ equity concentration and whether the asset seller is listed or not can significantly inhibit the possibility of signing performance compensation commitments,while cross-industry mergers and acquisitions,merger premiums,share-based payment ratios,target companies’ operating conditions,and target companies’ independent operations can significantly positively affect the willingness to sign the commitment.When a major asset reorganization event meets the ability to choose whether to sign the commitment,signing or not signing becomes a product of the game between the two parties.For the asset purchaser,signing the agreement is a kind of protection for itself and other small and medium investors.For the asset seller,signing the agreement is a way to show itself.Different perspectives have different thinking,and the final decision reflects the result of the game.In addition,this article further explores the influence of frequent mergers and acquisitions on decision-making motivations and the different levels of commitment displayed under different types of mergers.(2)After studying the decision-making motivations of performance compensation commitments,this article focuses the research perspective on the specific level of the commitment and explores the impact of various settings of gambling terms on the economic consequences of major asset restructuring.The study finds that the performance growth rate,share-based compensation,price compensation,longer commitment periods,segmented compensation form and the establishment of excess reward mechanisms can all be able to led the market to show a more positive attitude and form a more significant excess cumulative rate of return on the first disclosure date of major asset restructuring.At the same time,higher performance growth rates and longer commitment periods result in lower overall performance,while cash compensation,price compensation and segmented compensation can significantly improve the overall performance of the target company.The excess reward mechanism by itself can not bring about a higher performance realization rate,but the agreed reward amount and additional requirements can respectively have diametrically opposite and significant effects on it.On this basis,this article also analyzes its heterogeneity from the perspective of corporate nature and corporate governance,and examines the economic consequences of performance compensation commitments in more detail.(3)Two suggestions are put forward from the perspective of payment methods and indicator settings,such as step-by-step investment instead of one-time investment,setting various performance targets,etc.to strive to continuously improve this innovative financial tool.The main research contributions of this article are as follows: First,through the interpretation of the policy,this article analyzes the motivations for companies to independently choose to sign performance compensation commitments from the perspectives of asset sellers and asset purchasers,thereby triggering investors to thinking about the commitments.Second,starting from the settings of gambling terms,it has further deepened the interpretation of the performance compensation commitment mechanism,allowing investors to more clearly recognize the content of the mechanism and treat the commitment more rationally.Third,this article takes the settings of gambling terms as the entry point,and examines the possible economic consequences from the two perspectives of market reaction and performance realization,so as to further enrich the theoretical research related to the commitment and major asset reorganizations.Fourth,on the basis of drawing on foreign experience and combining with the actual situation of country’s M&A market,some suggestions are made for further optimizing and perfecting the setting of performance compensation commitments,and strive to make this innovative tool play a better role and realize the original intention of setting it up.