Research On The Motivation And Effect Of Performance Commitment Signed In Private Placement

Performance commitment,as a contractual tool to adjust transaction pricing,was originally formed in the period of non-tradable shares reform,and has been widely used in M&A.This paper will focus on the background of private placement,mainly because the combination of acquisition assets by private placement and performance commitment is more and more frequent in China's capital market.However,with the widespread use of it,many drawbacks gradually emerge.For example,some companies have the aid of earnings management to beautify the performance of target company;or some use various means to avoid performance compensation,thus violating the interests of shareholders.Therefore,performance commitment is only a soft constraint at present.This paper takes Steyr as a case study,deeply analyses the motivation of signing performance commitment in the process of private placement,and analyses the effect of performance commitment from two perspectives of value and incentive effect,trying to explain the motivation and effect of performance commitment signed by Listed Companies in the process of private placement in China.This paper finds that:the performance commitment signed in private placement is mainly to promote the smooth completion of private placement,while reducing valuation risk caused by high premium mergers and acquisitions;in addition,it can significantly improves the short-term share price of the buyer,but there is no significant effect on the improvement of financial performance and motivating management.