Research On The Effect Of Valuation Adjustment Mechanism On Financial Performance

With the rapid development of China's economy,it's become an important way for enterprises to seek development,industrial upgrading and cross-industry integration.The number of mergers and acquisitions in China is on rise year by year.However,due to the information asymmetry,trust is so low and the high premium is become a common,the risk of mergers and acquisitions are also on the rise.VAM can effectively reduce the risk and cost of merger and acquisition,enhance trust both sides,and significantly improve the efficiency of merger and acquisition.In recent years,it has been widely used in the practice of merger and acquisition cases in China.Whether the application of VAM will affect the financial performance has attracted the attention of the academic circle,but the empirical research on this issue is very scarce.Studying the influence of the VAM on the financial performance,using the VAM to realize the biggest benefit of enterprise,promoting the healthy development of China's capital market is very necessary and urgent.This article using the sample of Chinese A-share listed firms during 2015-2017 which has conducted the reorganization of assets,on the basis of theory,selecting appropriate variables to build the model,using the STATA as statistical analysis tool,we discuss the impact of VAM on financial performance.On the variable selection,this paper selects the signing situation of VAM,the compensation way of VAM,the achievement of VAM as explanatory variables,using the return on total assets to measure financial performance,using ROA as another index to test the stability of empirical research.Through the empirical research,we could get the results as follows:(1)VAM has positive influence on the financial performance.It can effectively reduce the information asymmetry between the two sides of the merger and acquisition,providing incentives and funds and management support for the enterprise,thus improving the financial performance of the merged enterprise.(2)If the VAM using stock right or mixed payment,which will has a greater positive impact on the financial performance than monetary compensation;If the VAM using stock right payment,which will has a greater positive impact on the financial performance than mixed compensation.Once the VAM is confronted with failure,the compensation which refer to stock right will lead to more losses,so it seems to have a major impact on enterprise.(3)If the VAM has achieved success,it will has a greater positive impact on the financial performance than which is faced failure.Enterprises which can complete the VAM successfully often has better management capacity and do better in increasing company profitability,which will bring obvious performance improvement.In the last part of this article,this research is on the basis that the result is analyzed,have proposed the following suggestion:(1)The acquirer should make the full due diligence when the merger still at a very early stage on this basis,a player makes reasonable assessment of target firm,and puts forward the rational price in the deal.(2)The merged enterprise shall reasonably estimate the performance based,on.its,own conditions and market conditions and could design the performance range for VAM.(3)Maintain the merged enterprise's predominant development,it's necessary to establish macroscopic thinking.Not those short-term behavior.(4)Strengthen the audit of the VAM and enhance the normalized usage of agreement to ensure the performance of the VAM.(5)So China needs to intensify the building of laws and regulations,enhancing the supervision of the service functions of such asset evaluation organizations.Only the both sides of merger and acquisition guarantee the quality of VAM and promote the success of VAM together could we maximize the function of VAM,improving the financial performance of enterprises.