Research On Performance Commitment And Protection Of Minor Shareholders' Interests In Merger And Acquisition

In recent years,under the influence of capital,the number and scale of M&A and restructuring events in China have been increasing constantly.However,with the increasing mergers and acquisitions,the problem of high valuations and high premiums has become more and more serious.Many companies have begun to use performance commitment to reduce the risk of mergers and acquisitions.In recent years,the merger and reorganization of the film and television industry has also emerged in an endless stream,maintaining rapid growth.However,due to the volatility of the film and television industry's earnings and the generally high premium rate of mergers and acquisitions,in recent years there being many cases of buying stars' "shell companies" and other issues,compared to other industries,the risk of film and television industry's merger and acquisition have its unique aspects.And the risk of mergers and acquisitions is also relatively large,so the application of performance commitments is more common.With the increasing application of performance commitments,problems in implementation have gradually emerged.The irrational design of performance commitments,the quality of performance deficiencies,the arbitrarily changing commitments,and the untimely disclosures have emerged.They weakened the adjustment premiums of performance commitments and the effects of reducing merger and acquisition risks.Besides,new risks have been derived.In some cases,performance promises have instead become a tool to increase stock prices and boost valuations,seriously damaging the interests of listed companies and small and medium shareholders.Therefore,this article takes Huayi Brothers in the film and television industry as an example to study whether the performance promise effectively promotes the operation of listed companies,protects the interests of small and medium shareholders,and hopes to provide a theoretical reference and practice advice for the application of the performance commitment mechanism in China.After summarizing the research literature on performance commitments and protection of small and medium shareholders,the paper analyzes the causes of performance commitments and the paths and mechanisms for avoiding merger risks based on information asymmetry and principal-agent theory.The paper studies its role in reducing M&A risk,and points out other risks that may be derived from performance commitments,in order to theoretically explain the protective effect of performance commitments on small and medium shareholders and the risks that may damage the interests of small and medium shareholders.Then the paper introduced the performance commitment case of Huayi Brothers from 2013 to 2016,analyzed the reasons for the signing of performance commitments,pointed out that the motivation for performance commitments was mainly to reduce the risk of M&A premiums,and also paid attention to the motivations that is unbeneficial,such as pulling up valuations and pushing up stock prices.Then,it analyzes the protective effect of Huayi Brothers' performance promises on small and medium shareholders,and finds that there are huge risks in performance commitment design and performance quality,which makes it difficult to promote the operation of listed companies and to protect the interests of small and medium shareholders.Second,the large shareholder of Huayi Brothers took the opportunity to reduce shareholding and managed to make Yinhan accomplish its commitment by cheating.Then by analyzing the performance of listed companies during the performance commitment period and the response of small and mediumsized shareholders to the compensation,the paper exploded whether the performance commitments and subsequent compensation played a positive role in the protection of small and medium shareholders.Finally,through the above analysis,this article concludes that a series of performance commitment signed by Huayi Brothers did not play the necessary role in reducing merger and acquisition risks and protect the interests of small and medium shareholders,and it brought certain risks to small and medium shareholders.Then it gives advice on reasonable valuations,scientifically designed performance commitments,and strengthened supervision.The main innovation of this paper is to study the relationship between performance commitments and the protection of minority shareholders' interests from different perspectives.To distinguish from the existing literature that mainly deals with the short-selling and compensation methods of major shareholders,the paper studied some other aspects,such as the design and performance of performance commitments.Secondly,the selected cases were relatively novel and it studied the film and television industry where there's always a high premium rate.