Valuation Adjustment Mechanism And Management Opportunistic Behavior

The core of this paper is managerial opportunistic behavior under performance commitment agreement.Performance commitment agreement is the main type of Valuation Adjustment Mechanism(VAM)which is a mechanism introduced from foreign countries.In 2003,Mengniu Dairy signed a performance-based agreement with Morgan Stanley and other institutions when pursuing foreign investment.For the following few years,many well-known domestic companies used this mechanism,such as Yongle Electrical Appliances,Prince's Milk Group,China Resources Group and so on and more and more people have known this mechanism since then.With the development of domestic economy and the increasingly active capital market,VAM has been widely used in market practice in recent years,especially in the financing and mergers and acquisitions activities.According to Wind's statistics,there are more than 3800 listed companies that signed VAM agreements in the M&A events from 2012 to 2018,and the number is increasing year by year.In 2018,more than 1000 listed companies signed the agreement in which most are based on performance.VAM can only play the role of contract in market activities.Therefore,no matter which industry,the risk exists.Practically,VAM is practically valuable.However,if it is abused or maliciously used as a means of arbitrage and disguise tool,it is difficult to show its value.Therefore,VAM brings not only resources but also uncertainties and operational pressures,even risks and problems.If the operator cannot well digest the pressure of gambling,and if there is a group only caring self-interests,management opportunistic behavior and other problems will occur.It's sure that VAM especially performance commitment agreements will be used frequently in domestic market transactions in the near future.In order to prevent and suppress the possible management opportunistic behavior when using VAM,promote the healthy development of the market and ensure the orderly operation of various industries,it is necessary to study the mechanism of valuation adjustment.This paper is based on the case of listed company Steyr Motors,which signed a performance commitment agreement with its controlling shareholder in the process of acquiring financing for acquisition.On the surface,the agreement was signed for the purpose of helping to transform and encouraging its development and operation.However,in-depth study found that another interest group with bad aims was involved in.Performance commitment thus was no longer just a mechanism for adjustment,but also a tool for profiteering.Combing the main points with the specific situation of the case company,this paper focuses on the various opportunistic behavior of enterprise management under the performance commitment agreement.The first part of this paper expounds the theme,research background and significance,research methods and research framework.The second part summarizes the relevant researches of the theme.The third part lays the theoretical foundation of the whole paper and give an overview of the research theme.The fourth part is the status quo of domestic application of VAM.The following part focuses on the case companies,including its situation,performance commitment agreement.Then the paper further explores management opportunistic behaviors under performance commitment agreements at case company,and analyzes the motivation behind those behaviors and its consequences.Finally,based on the above analysis,this paper extracts the research conclusions,and puts forward some suggestions on the practical application of performance commitment in view of the problems and the company studied in this paper.