Performance Compensation Commitment,Information Asymmetry And M&A Performance

With the rapid development of China’s capital market,merger and acquisition has become an important means for more and more listed companies to carry out business expansion and industrial integration innovation.One of the important solutions to the information asymmetry in mergers and acquisitions is to sign the performance compensation agreement.The performance compensation commitment agreement is also a contractual tool for both parties to deal with the uncertain risks in the future.From 2008 to 2019,China securities regulatory commission(CSRC)has been constantly adjusting the performance compensation commitment system according to the implementation of policies and the reflection of the market.Therefore,it can be seen that the performance compensation commitment agreement plays a huge role in m&a transactions.Performance compensation commitment is conducive to revealing the real value of the merger,and performance compensation commitment agreement is conducive to reducing the information asymmetry between the two sides of the merger and external investors.In this paper,743 m&a events on the board of small and medium-sized enterprises and the growth enterprise market between 2014 and 2016 were taken as samples to investigate the impact of performance compensation commitment on m&a performance from the perspective of information asymmetry.The analysis in this paper is divided into two stages.First of all,this paper studies what kind of enterprise characteristics and m&a characteristics make the acquirer adopt performance compensation commitment agreement in m&a transactions.In the second stage,this paper differentiates merger samples according to whether performance compensation commitment is adopted or not,and adopts the method of mean t-test to verify the difference of accumulated excess returns between the companies using performance compensation commitment and other companies during merger.This paper also examines the degree of information asymmetry between companies with and without performance compensation commitments.Then,this paper divides performance compensation into stock compensation and cash compensation to verify the differences of different compensation methods.Furthermore,this paper adopts the stepwise regression method to verify that the performance compensation commitment system reduces the degree of information mismatch between the two sides of the merger,thus improving the performance of the merger.At this stage,this paper adopts the propensity score matching method to control the endogenous problem caused by sample selection bias.The empirical study of this paper finds that the larger the scale of merger and acquisition,the more likely the acquisition enterprise is to adopt performance compensation commitment.The higher the excess cash holding and the more concentrated the equity,the less likely it is to adopt the performance compensation commitment.The performance compensation promise in the m&a transaction can reveal the value of the enterprise,effectively reduce the degree of information asymmetry between the enterprise management and external investors,and significantly improve the m&a performance.Further research shows that the signal effect of stock compensation is more obvious than that of cash compensation.The contributions of this paper to the existing literature are mainly reflected in the following aspects.Firstly,this paper explores the influence of corporate characteristics and merger characteristics on whether to adopt performance compensation commitment.Secondly,this paper applies the market signal theory to study the performance compensation commitment problem from the perspective of solving the information asymmetry problem,analyzes the performance compensation commitment’s restraining principle on moral hazard and adverse selection,confirms the signal effect of performance compensation commitment,and enriches the research content of performance compensation commitment.