Research On The Impact Of Performance Commitment On Corporate M&A Performance

Since its official implementation in May 2008,the performance commitment arrangement has been one of the core elements of M&A transactions and plays an important role in M&A transactions.Performance Commitment aims to protect the interests of small and medium investors,however,during the implementation process,"high stock price,high profit forecast,and high performance commitment" also appeared,which affects the market pricing mechanism and the decision-making behavior of investors.In November 2014,regulators adjusted their performance commitment policy,which cancelled the mandatory regulations for non-associated M&A transactions.However,as the performance commitments in mergers and acquisitions have gradually formed the market inertia,listed companies still generally require the counterparty to sign a performance commitment compensation agreement.The application of performance commitments in M&A has been 10 years,and relevant regulatory requirements have also changed.The impact of performance commitments on the performance of listed companies is worthy of summarizing and discussing.This paper mainly uses information asymmetry theory,signal theory,and target incentive theory and selects M&A events happened in the A-share market of China between 2008 to 2016 as research samples,and explores the impact of performance commitments on M&A performance.The study found that:(1)Performance commitments can significantly improve the M&A performance of listed companies.And the mandatory use phase is more significant than the self-selection phase.(2)Compared with the cash compensation method,the share compensation has a more significant effect on the M&A performance of listed companies.But this conclusion is not found in the self-selection phase.(3)Compared with the one-way performance commitment,the two-way performance commitment has not been more significant in improving the M&A performance of listed companies.(4)The lower the degree of marketization,the more obvious the effect of performance commitment on the M&A performance of listed companies.This paper provides some guiding suggestions for enterprises to reasonably choose performance compensation methods in mergers and acquisitions,and also provides important empirical evidence for the dynamic adjustment effect of performance commitment supervision policies.