Research On Enterprise Earnings Management Under Performance Commitment

Performance commitment system in China was first created and used in the period of share equity reform.The original intention was to reduce the problem of information asymmetry between the two parties in mergers and acquisitions,to maintain fair transactions,and to protect the interests of listed companies and outside investors.However,with the diversification of M&A in the capital market,the actual application of performance commitments is not optimistic.Both parties to the merger and acquisition may use high performance commitments to obtain high transaction considerations of the target company based on common interests and demand,and at the same time increase the stock price of listed companies through positive signals from the market.This leads to the phenomenon of 'high performance commitments' and high performance commitments.It also lays hidden dangers for the earnings management of the target company.Relevant data shows that in 2017,as many as a quarter of the 622 target companies in the performance commitment period were accurately completed performance commitments,and there were some signs of performance decline in the later period.Based on this,we have reasons to suspect that the promised party has performed earnings management for the 'patch-up' performance.This article takes H&R Century backdoor Stellar Mega Union as an example to study whether there is earnings management behavior behind the company's ' accurate performance commitment' and 'performance change',with a view to providing practical suggestions for the further improvement of China's performance commitment system.It also provides a reference for effective supervision by regulatory authorities and effective investment by small-and-medium shareholders and creditors.This article reviews the research results at home and abroad from three aspects:performance commitment,earnings management,and the relationship between performance commitment and earnings management.Based on the information asymmetry theory,contract theory,and moral hazard theory,this paper conducts a detailed analysis of the case,and finally concludes The following conclusions:(1)H&R Century under performance commitment is based on contractual motivation,capital market motivation,evasion of regulatory motivation,and poor profitability,which induces earnings management behavior;(2)H&R Century conducts both before and after the backdoor listing;(3)H&R Century barely fulfilled its performance commitments through earnings management,but severely deteriorated its financial position,harmed the interests of small-and-medium shareholders and creditors,and was ultimately not conducive to the long-term operation and development of H&R Century and the listed company.