On The Effect Of Performance Compensation Commitment On Merger&Acquisition Performance Of Listed Companies

As a significant institutional arrangement in mergers and acquisitions(M&A),the performance compensation commitment aims to improve the quality of M&A of listed companies through mandatory earnings forecast disclosure and compensation for profit forecast differences.However,there is still disagreement in China's academic circles on whether performance compensation commitments can improve M&A performance.Supporters mainly analyze the improvement of synergies,while opponents focuse on high M&A premiums and major shareholder tunneling.Not only that,from the practice point of view,since China Securities Regulatory Commission(CSRC)promulgated the "measures for the administration of material assets reorganization of listed companies" in 2008,the performance compensation commitments have also exposed many problems,such as: failure to meet the standards,random changes in compensation methods,performance commitments,inability or refusal to perform the compensation agreement,performance change after the expiration of commitment,etc.In addition,with the concentrated expiration of performance compensation commitment in 2018,the listed companies are under great pressure of goodwill impairment in the first half of 2019,which has also become a "time bomb" hindering the smooth operation of the stock market.Therefore,whether the performance compensation commitment can improve the M&A performance of listed companies becomes the key issue.In order to solve the above problems,this paper reviewes the relevant institutional background and practice,and based on the information asymmetry theory,signal transmission theory and incentive theory,analyzes the impact path and mechanism of performance compensation commitment on M&A performance.Based on the above derivation,this paper proposes the research hypothesis and conducts an empirical analysis and a paired analysis on the impact of performance compensation commitment and the expiration of performance compensation commitment on the financial performance of listed companies.Finally,in view of the typical case of J&R Optimum Energy 's acquisition of Optimum Nano Energy,the specific content and implementation process of its acquisition motivation,performance compensation commitment are analyzed.Based on the analysis framework of financial strategy matrix,the influence of performance compensation commitment on the M&A performance of listed companies is analyzed from two aspects,namely market reaction and financial indicators.The conclusions of this paper are as follows: first,the performance compensation commitment has a signal transmission effect,which increases the possibility of highquality enterprises being acquired,and has an incentive effect on the management.Therefore,the performance compensation commitment can improve the M&A performance of listed companies.Secondly,there is a risk that the financial performance of listed companies will change after the expiration of performance compensation commitment,that is,the management may pay more attention to the business performance during the performance commitment period and neglect the longterm performance,resulting in the decline of the profitability of listed companies after the expiration of commitment.Accordingly,this paper gives some policy Suggestions.Firstly,the performance compensation party should be the original shareholders of the target company.Secondly,it is necessary to perfect the information disclosure of the compensation ability of the indemnifying party.Finally,performance compensation commitment judgment indicators are more diversified.The possible incremental contributions of this paper are as follows: first,the internal correlation between performance compensation commitment and M&A performance is sorted out through model derivation;Second,based on the empirical research and the case study of J&R Optimum Energy,this paper explores the influence of performance compensation commitment on the short-term and long-term performance of the company.This paper enriches the research results and has a certain reference value to improve the relevant regulatory regulations on M&A performance compensation commitment.However,due to the incomplete disclosure of relevant information,the research results of this paper still have limitations.