Research On Financial Conflicts In Parent-subsidiary Companies Based On Business Commitments Perspective

Recently,there are a large number of mergers and acquisitions in China.Mergers and acquisitions often include business commitments.But the unrealized business commitments appear frequently which have some high business commitments.By higher business commitments,sellers can obtain more premium in M&A transaction.But if the expired business commitments was not completed,it will damage the interests of acquirer.In acquisition of majority interest,the two parties become parent-subsidiary company after the transaction.Business commitment plays an important role in mergers and acquisitions.For the performance of the unrealized business commitments lead to a financial conflict between the two parties,on the surface it is the completion problem of business commitments.But in fact,it is the unreasonable business commitment that resulting in the parent company and the overall interests of corporate groups damaged.So,in order to minimize the harm caused by the unreasonable business commitment of the enterprise group,after combing the literature,the article comprehensively uses the basic theory of information asymmetry theory,contract theory and conflict theory to analysis financial conflicts in parent-subsidiary companies based on business commitments perspective.The paper proposes the establishment of an assessment framework,through a comprehensive analysis of the business environment to assess the rationality of business commitments.The framework includes three parts.They are macro environmental indicators,industry environmental indicators and internal environmental indicators.In this paper,as a case study of Shanghai Lvxin acquisition Zhejiang Demei,it analyzes the financial conflict event of the two companies,evaluates the business commitments at the time of M&A,and finds out the rationality of their business commitments.At the end of the article,according to the implications of the case,some recommendations are made on the internal management of other enterprise groups based on business commitments.Firstly,do the due diligence in merger and acquisition,and reduce the degree of information asymmetry.Secondly,maximizing the interests of the group as the goal.The group should establish the concept of financial coordination,and make the pace of development of the parent and subsidiary company as much as possible.Thirdly,establish the long-term incentive and restraint mechanisms to reduce the short-sighted performance of business commitments.Finally,the group should strengthen the supervision and communication of subsidiaries,and detect potential problems timely.