The Study On Performance Commitment And Its Fulfillment In M&As Of The Film And Television Industry

With the steady and continuous development of Chinese economy and the improvement of people's income,the cultural industry,as a pillar industry,becomes an important force driving economic growth and stimulating consumption.The Chinese government issued a succession of supporting policies,creating a favorable environment for the further development of the cultural industry.As a sub-industry of the cultural trade,the film and television industry came into the golden times of rapid development.China's total box office receipts have exceeded 50 billions in 2017,an increase of 326.23% over 2011.In the aspect of TV play,China has 130 or so production agencies of Class A.The number of TV play production agencies(class B)is nearly 3000.Besides,the scale of TV series production of our country ranked top 1 in the world.The enormous potential and bright prospect the film and television industry shows attract a lot of capital,thus mergers and acquisitions are quite hot since 2013 in the line.The performance compensation commitment,which is brought out in order to guarantee the quality of the underlying assets and protect the rights and interests of investors,is used in M&As extensively.However,the actual effect usually deviates from the original intention of this system.And the phenomenon of performance not meeting standard and breach of contract is common: Some changed the content of commitments;some escaped their responsibility by earnings management;some seek the performance improvement in the short run,at the cost of the long-time development;and some even refused to meet the commitment,leading to lawsuits······Firstly,this paper explains the meaning,policy background and theoretical basis of performance compensation commitment;Then,based on the case study of Huayi buying out three film and television enterprises,this paper analysis the disadvantages of performance compensation commitment and the reason why it damages the interests of minority shareholders.Finally,some suggestions are put forward to deal with the problems brought by performance compensation commitment.The main conclusions of this essay are as follows: first,in the film and television industry which is characterized by high performance commitment and high premium,the crisis of meeting performance commitment has showing many disadvantages,deviating from the original purpose of such system;second,performance commitment cannot resolve all risks involved in mergers and acquisitions.Besides,performance commitment itself contains some sorts of risks.Consequently,both sides need to weigh the pros and cons;third,the governance of the performance commitment system and its application,urges various efforts from parties involved in mergers and acquisitions,regulators and vast investors.