Protection Of Minority Shareholders' Interests From The Perspective Of Performance Compensation Commitment

With the continuous development of merger and reorganization market,more and more listed companies have improved their development ability through merger and reorganization.However,due to the asymmetric access to information and the relatively high consideration in the domestic Mergers and acquisitions(hereinafter referred to as m&a)market,the minority shareholders with weak capital and low voice are the vulnerable groups in the m&a activities of listed companies,and their rights cannot be effectively guaranteed.In this case,performance compensation commitment is proposed as a risk control tool.When the related parties carry out m&a activities,the application of the performance compensation promise enables the m&a company to control the value evaluation of the target company within a reasonable range.When non-related parties carry out m&a activities,the frequency of overvaluation of the target company increases.When some enterprises fail to fulfill the promised performance,they cannot compensate the acquirer in accordance with the agreement,but choose to change the compensation scheme to avoid liability.When this happens,performance compensation commitments do not play their original role.On the contrary,the enterprise may fail to complete the subsequent business performance as promised due to the excessively high valuation of the target company.The market and the enterprise will react to the under performance of the target company,which will eventually lead to the deterioration of the business performance of the enterprise,a sharp decline in the stock price,and a decrease in the income for the interests of minority shareholders.Therefore,it is of great significance to study whether performance compensation commitment agreement can truly protect the interests of minority shareholders.This paper first introduces the related concepts of performance compensation commitment.On the basis of reading a large number of research literature on performance compensation commitment,this paper summarizes the relevant views of domestic and foreign scholars,and proposes that the signing of performance compensation commitment by both parties in a merger and acquisition transaction can theoretically restrain and motivate the management of the target company to improve its performance,so as to protect the interests of minority shareholders.However,as a matter of fact,the existence of various uncertain factors leads the acquirer to be unable to accurately evaluate the value of the target company,resulting in a large deviation between the predicted performance of the target company and the actual performance.Secondly,Jinlong Machinery & Electronic Co.,Ltd.(hereinafter referred to as "Jinlong Electromechanical ")acquisition of Wuxi Boyi Optoelectronics Technology Co.,Ltd.(hereinafter referred to as "Boyi Optoelectronics")as the research object.This paper summarizes the basic situation and performance compensation commitment of Jinlong Electromechanical,and analyzes in detail the impact of internal and external reactions caused by performance compensation commitment on the interests of minority shareholders.This paper analyzes the financial indicators,market reaction and internal reaction of enterprises.By analyzing the profitability and growth capacity of Jinlong from 2013 to 2017,it is determined that the application of performance compensation commitment in merger and reorganization will affect the business performance of the enterprise.By analyzing and calculating the changes of Jinlong's stock price and excess return before and after the occurrence of relevant events,we can measure the market's response to the occurrence of such events.The related events of performance compensation commitment of Jinlong mainly include signing performance compensation commitment,adjusting profit compensation scheme and receiving performance compensation.Finally,this paper also studies the negative impact of performance compensation commitment mechanism in enterprises from the aspects of merger premium rate,goodwill impairment,reduction of shares held by major shareholders and so on.Finally,based on the above research,conclusions are drawn and feasible Suggestions are put forward from different perspectives.The research finds that: first,performance compensation commitment can bring positive influence to both sides of the transaction at the early stage of signing.For the management of the target company,the performance compensation commitment can enable the management of the target company to actively improve the business performance of the enterprise,realize the promised performance as agreed,and effectively protect the interests of minority shareholders in the short term.In order to achieve better development,enterprises must improve their profitability.It is not advisable to rely only on the short-term effect brought by performance compensation commitment.Second,when the target company fails to fulfill its performance commitments in accordance with the agreement,both parties of the transaction choose to change the compensation scheme or conduct performance compensation,the stock price of the enterprise will decline,and the earnings of the minority shareholders from the enterprise will also decrease.It can be seen that performance compensation commitment cannot protect the interests of minority shareholders continuously.Thirdly,the performance compensation commitment made by the target company promotes the occurrence of high premium m&a.High premium m&a may lead to goodwill impairment of listed companies and arbitrage of major shareholders' reduction,leading to more risks for minority shareholders in m&a and restructuring transactions.In order to better protect the interests of minority shareholders with performance compensation commitment,this paper puts forward some countermeasures and Suggestions from the perspectives of the acquirer,the target company and the regulatory authorities.Through the research of this paper,enterprises can be reminded to pay attention to the high premium valuation brought by performance compensation commitment in m&a and restructuring,and to take the long-term development of enterprises into consideration when making relevant investment decisions,and reasonably determine the evaluation value and performance commitment terms.It also aims to remind the minority shareholders to improve their vigilance,not blindly trust the performance commitment to protect their own interests,and excessively rely on the performance commitment.