The Impact Of Performance Commitment On The Earnings Management In The Directional Issuance

With the rapid development of private placement and mergers and acquisitions,the number of performance commitment agreements between restructuring transaction entities has also increased.The original intention of the M&A companies to make performance commitments is to solve the problem of information asymmetry between M&A and transaction entities and protect the interests of minority shareholders.However,the performance commitments of companies such as Pubang Co.,Ltd.,China Testing and Co.,Ltd.are all completed by the pressure line.Moreover,the company’s shareholders or management have the motivation to achieve performance commitment through earnings management,which leads to disputes about the role and influence of Chinese scholars on performance commitment.Performance Commitment The economic consequences of research have received much attention in recent years.The existing research has not discussed in depth the impact of the specific content of the performance commitment and performance commitment agreement on the degree of earnings management of the company in the private placement and reorganization.This research manually collecting financial data of A-share listed companies that have made performance commitments in 2013-2017,and an empirical study of the relationship between performance commitment and earnings management.This study intends to conduct a regression analysis of the financial data of listed companies that have made performance commitments and failed performance commitments in mergers and acquisitions.Exploring whether the acquirer who has signed a performance commitment in the M&A transaction has a greater degree of earnings management and how the target company manages earnings.At the same time,analyze the equity nature of the target companies that make performance commitments and whether the differences in the profit growth rate,compensation method,and commitment direction in the performance commitment agreement have different degrees of impact on the earnings management of the target enterprise.Through theoretical analysis and relevant empirical tests,this study mainly draws the following conclusions:(1)In private placements,companies that make performance commitments have greater incentives to manage earnings than companies that do not make performance commitments;(2)Compared with state-owned enterprises,non-state-owned enterprises that make performance commitments have a greater degree of earnings management;(3)The net profit growth rate agreed in the performance commitment agreement has an inverted U-shaped relationship with the target enterprise earnings management degree;(4)Compared with the enterprise that promises compensation in the form of cash,the compensation method is that the degree of earnings management in the form of equity is greater;(5)Two-way performance commitments are more manageable than one-way performance commitments.For the empirical analysis,this study believes that in the private placement M&A,the value evaluation method of the target enterprise should be improved.Supervise the target company to disclose the basis for forecasting net profit in the performance commitment agreement,and strengthen the external supervision after triggering the performance commitment compensation,to reduce the underlying corporate majority shareholders or management to manage earnings and protect the interests of shareholders of M&A companies and target minority shareholders.