Research On The Risk Of Performance Compensation Commitment In The Merger And Reorganization Of Listed Companies

With the increasingly active m&a market in China,the number of m&a of listed companies is increasing,and the scale of m&a is also expanding.The number of m&a in China increased from 1915 in 2008 to 11170 in 2018,and the transaction scale also increased from 0.78 trillion yuan in 2008 to 2.48 trillion yuan in 2018,but the rapid development of m&a market also brings a series of risks.In order to protect the interests of both parties and shareholders,reduce high valuation risk,motivate the management,the performance compensation agreement has been increasingly applied in mergers and acquisitions.However,since the performance compensation institution was put forward in 2008,it is still in the process of constant modification and improvement,which brings new risks while preventing risks.Therefore,in the process of mergers and acquisitions,listed companies should view the guarantee effect of performance compensation commitment objectively,it is very important to manage risk during its operation.This paper reviews the background of the emergence of performance compensation agreement and relevant theoretical literatures at home and abroad.Combing out the theoretical basis of the risk of performance compensation commitment.Then,this paper selects the case of Xinyada systems engineering co.LTD acquisition of Shanghai kejiang information technology co.LTD,which involves a large amount of money in the use of performance compensation agreement.And the case is relatively complete and has representativeness.Firstly,on the basis of introducing the basic situation of both parties and the process of m&a,this paper summarizes the transaction scheme,compensation arrangement and the completion of performance commitment signed in the performance compensation agreement,And analyzed the reasons why the performance was not completed,and the impact on listed companies;Secondly,from the perspective of the m&a party,focusing on its commitment to the m&a performance before and after the compensation in different stages,summarizes the risk analysis,.From the high premium risk,goodwill impairment risk,business risk and later integration risk four aspects of the specific analysis and demonstration;Finally,some Suggestions are put forward for the listed companies when using performance compensation agreement to avoid risks.Through this study,it is found that: for listed companies,performance compensation agreement can produce positive market effect while increasing m&a premium.However,it can only improve the earnings of listed companies in the short term and cannot guarantee the long-term business performance of the acquirer.Moreover,the completion degree of performance commitment will gradually decrease with the increase of the commitment period.When the target company fails to achieve the promised performance target,the market reaction is more negative.It not only affects the current business performance of listed companies,but also faces the risk of merger and acquisition failure.Therefore,listed companies should not blindly rely on the guarantee function of performance compensation commitment in m&a.In order to protect the interests of both parties and promote the healthy development of the m & a market,it is necessary to carry out the risk management of performance compensation commitment in a timely manner.