Motivation And Effect Analysis Of Performance Commitment

In recent years,the number and scale of M&A transactions in China's capital market has increased dramatically.As an innovative form of M&A contracts,the introduction of performance commitments is constantly being adopted by both parties.In 2005,the performance commitment was first used in China in the share-trading reform.In 2008,the "Measures for the Management of Major Asset Restructuring"issued by the China Securities Regulatory Commission was the sign of the introduction of asset mergers and acquisitions in the form of regulations.Performance commitments have played a positive role in protecting the interests of small and medium shareholders,but more are just a "short check." As the cases of unfulfilled performance commitments are disclosed frequently,the implementation effort of performance commitments is more and more worthy of attention,and the motivation needs people to re-examine.First of all,this paper reviews the research literature related to performance commitment,and sorts out the relevant theoretical basis.Then,linkes the theory with the actual situation,and analyzes the motivation and effect of the performance commitment of IRTOUCH and Wang Xin Precision by applying case analysis method.Specifically,it includes several steps as follow:the first step,a brief introduction to the transaction objects and processes involved in the case,then followed by the case analysis of performance commitments;the second step,starting from the case itself,judging motivation for M&A to sign performance commitments from the perspective of investors and acquirers;the third step is to analyze the effects of implementing performance commitments from the three dimensions of synergistic effect,interest transfer and market response.Furthermore,the the event research method is conducted in the analysis of market reaction before and after the performance commitments,the specific application is using the BHAR method in long-term market responses analysis,using the CAR method in short-term market responses analysis.Based on the analysis of the case,this paper draws the following conclusions:The motivation of introducing performance commitment in M&A transactions is mainly to protect the interests of small and medium-sized investors and acquirers.As a result,the synergy level of M&A and the stock price of listed companies can be significantly improved in a short period of time after implementation.However,it is very limited,and it will provide opportunities for major shareholders to reduce their holdings.It will not fundamentally change the long-term negative impact on the interests of the acquirer and minority shareholders.Finally,based on the conclusions obtained in this paper,recommendations are put forward corresponding to how company rationally apply the Performance commitments,how investors are more rationally investing,and how the regulatory authorities improve their performance commitment system.The innovations of this paper are as follows:(1)Engage in the analysis of the reasons for the performance commitments of the merger and acquisition parties,and conduct research on the effect of the commitment period and after the expiration,expanding the time dimension of the performance commitment time;(2)Multi-angle and the same direction to demonstrate the impact of performance commitment on the synergy of business operations,the transfer of interests of major shareholders and market response,to show a variety of research issues in a single system case study.However,this paper may have a certain particularity in a single case study,due to the limitations of the industry and the characteristics of the case.The universality of the conclusion is yet to be verified.In addition,other factors on business operation cannot be completely excluded in the study of the effect of performance commitment.Therefore,research on performance commitments needs to be further enriched.