The Performance Commitment Of Major Shareholders And The Interests Protection Of Minority Shareholders

With the prosperity of the domestic economy,the M&A market is increasingly active.So the hidden risks in the transaction are also gradually highlighted.In particular,in the reorganization transactions,there are frequent high-value valuations due to unreasonable assets,which will encrouach the interests of minority shareholders.At this time,as a risk management tool,the performance compensation commitment system came into being.In practice,performance commitments create conditions for high valuations of assets.Major shareholders can obtain a higher return than the performance commitment cost from the high premium valuation,in this case,performance commitments will intensify the estimation of assets.When the company's performance isn't up to standard,the major shareholder may evade the compensation responsibility by means of reduction of holdings,and a series of reactions within the company and the market will have a direct impact on the interests of the minority shareholders.Therefore,whether the performance commitment can truly protect the interests of minority shareholders in practice is urgently needed to be studied.This article firstly reviews the literature on the nature,effects,compensation methods and the protection of the interests of small and medium investors.After analyzing the high-yield valuation of the underlying assets caused by the high performance promise of Shandong Geo-Mineral Co.,Ltd.,the article analyzes the impact of performance commitment on the interests of minority shareholders from the short-selling behavior and market effect of major shareholders,and finally puts forward relevant suggestions based on the conclusions of the case study.Through the research,this artile finds that:(1)The high performance commitment made by major shareholders is an important condition for the high premium of asset valuation,and the use of high performance commitments to send positive signals to the market and regulatory agencies.(2)High-performance promises are regarded as a positive signal for the purchase of high-quality resources by minority investors in the secondary market.At the same time,it also provides a way for major shareholders to short-sell.Due to information asymmetry,monority shareholders can't identify the interests of major shareholders.(3)From the perspective of corporate performance,performance commitment can only improve the company's operating performance in a short period of time.Once the company's profitability has not improved,the small and medium shareholders will face greater losses.From the perspective of market effects,the market has a negative attitude towards the implementation of performance commitments.The compensation for performance of Shandong Geo-Mineral Co.,Ltd.has not played a role in maintaining the company's development and protecting the interests of minority shareholders.The research perspective of this paper is based on the protection of small and medium investors,enriching the theoretical research on the performance commitment of small and medium shareholders.Through case analysis,the relevant countermeasures and suggestions related to improving the performance commitment system and protecting the interests of investors are of great significance in practice.