The Impact Of Valuation Adjustment Mechanism On The Performance Of Merger Transaction And Its Sustainability

Since 2013,the number and scale of mergers and acquisitions are on the rise,and mergers and acquisitions have become an important way for listed companies to achieve capital expansion.As the government's strong support for M&A in key industries and the extension of development itself has the advantage of promoting the rapid development of enterprises,it is expected that M&A and reorganization transactions will continue to be a hot form of capital market transactions in the coming years.With the rise of this form of trading,the performance of gambling in mergers and acquisitions is also increasing.According to statistics from WIND,803 listings were issued between 2014 and 2016.Among them,512 mergers and acquisitions signed performance compensation clauses,accounting for 64% of the total,involving 325 listed companies,accounting for 77% of the total number of listed companies that had mergers and acquisitions in the past three years.Performance compensation clause is a kind of valuation adjustment mechanism.Its essence is the contract clause that investors guarantee their investment income.Practice and theoretical research show that the performance compensation clause is helpful to control the management's moral hazard in the merger and acquisition transaction,and plays a restraint and incentive role in the performance promotion of the target company.However,due to the imperfection of performance commitment system and the inevitable principal-agent problem in enterprise management,opportunistic behavior emerges in endlessly,and many target companies have the problem of "performance change face" after the commitment period.In view of this problem,this paper,on the basis of existing relevant research,adopts the method of combining theoretical analysis with empirical research,makes a more in-depth study on the effect of performance compensation clauses on the performance growth of the target company in the commitment period and the earnings sustainability after thecommitment period,and then draws the conclusion of the study.On the basis of the relevant policy recommendations.Firstly,in M&A transactions,firms with performance compensation commitments have significantly higher performance growth in the commitment period than those without performance compensation commitments.Secondly,there is an inverted U-shaped relationship between the performance growth rate of the target company and the commitment performance growth rate during the commitment period,that is,with the increase of the net profit growth rate stipulated in the performance compensation commitment,the performance growth of the target company shows a trend of increasing first and then decreasing.From the perspective of the market as a whole,there is an optimal commitment industry.The growth rate can maximize the profitability of the target companies.Thirdly,compared with those without performance commitment,there is a certain degree of "performance disfigurement" after the commitment period,that is,performance commitment reduces the persistence of earnings after the betting period.Previous empirical studies on the effect of betting agreements and performance commitment clauses mostly focused on the performance changes of listed companies,less on the performance of M&A of target companies,and more on the performance changes during the commitment period.This paper uses empirical research method to analyze the impact of performance commitment on target company's performance during and after the commitment period,which enriches the weak links of research and has certain theoretical and practical enlightenment value.