Does Performance Commitment Protect The Interests Of Small And Medium Shareholders?

Performance Commitment as a contractual arrangement for China's capital market pricing adjustment,more and more applications in mergers and acquisition reorganization,the policy design is to protect the interests of small and medium-sized shareholders by curbing the use of information asymmetry to manipulate the purchase pricing by both sides of the merger and acquisition transaction.Existing case studies and large-scale empirical tests also indicate that performance commitment plays a positive role in improving corporate performance and protecting the interests of small and medium shareholders.(Gao et al.,2010;Pan Ailing et al.,2017).However,in recent years,the target company triggered performance compensation due to the fact that the actual profit is not up to standard,and the use of private placement to become the major shareholder of the listed company has changed the compensation clause of the identity change,and brought a series of corporate reputation impairment and performance decline risk.The role of performance commitments in protecting the interests of minority shareholders is questioned.This paper takes Yushun Electronics to increase the acquisition of ATV technology as a research case,using a combination of case studies and theoretical research,combined with event research,indicator analysis,and cost-benefit analysis of major shareholders,Firstly,through the analysis of short-term market reaction CAR,long-term holding income BHAR and long-term accounting performance before and after this performance commitment,it is found that the existence of performance commitment is not only failed to effectively protect the interests of small and medium-sized shareholders,but to some extent harm the interests of small and medium-sized shareholders.Secondly,based on this phenomenon,combined with China's institutional environment and theoretical basis,the theoretical analysis framework of the different influence paths of "institutional environment ? major shareholder performance commitment motivation ? small and medium-sized investor interests protection" is constructed,and it is considered that under the ideal state of perfect system,Performance commitments can enhance M&A performance and protect investor interests;while external supervision is lax,large shareholders have incentives to use performance commitments to make a profit.Finally,through the cost-benefit analysis of the major shareholders of Yushun Electronics M&A in this performance commitment,it is found that the target company's major shareholders use the performance commitment to push up the valuation premium,and obtain high negotiation benefits while changing the performance compensation clause to reduce the cost of default;the major shareholder of the listed company uses the performance commitment to push up the stock price rise,and after the release of the ban period,it will withdraw from the market after a series of reductions,and finally transfer the risk of performance default and stock price decline to the small and medium shareholders.At the same time,the defaults of intermediaries and regulatory authorities have also escorted the short-selling behavior of the major shareholders of both parties.The paper found that in the institutional environment of weak legal risk,performance commitments may have different interpretations in China's capital market.It does not necessarily encourage the target enterprise to work hard,nor can it effectively restrain the big Shareholders' agent behavior may instead become an effective means for insiders to collude with outsiders to short-list listed companies.The research in this paper points out the shortcomings of performance commitment in practical application,and it can be used as a reference for standard system construction and optimization of investor protection.