Performance Compensation Commitments And Protection Of The Interests Of Small And Medium Shareholders In Mergers And Acquisitions

In 2008,the CSRC first proposed the concept of performance compensation commitment.The reason why the CSRC encourages the establishment of performance commitment compensation is to reduce the information asymmetry and ensure fair trading in Merger and Acquisition,thereby protecting the interests of minority shareholders.However,due to the widespread application of the income method,high performance commitment and high valuations appeared in actual use.When the performance commitments don't meet the standards,it will cause some problems and affect the interests of minority shareholders.This article takes company X as the research object,and adopts a method combining case studies and theoretical research,combined with event study method and financial index analysis method.First,by analyzing the market effect and financial situation before and after performance commitment,the study found that the performance commitment in the case of Company X not only did not protect the interests of minority shareholders as ideally,but also harmed the interests of minority shareholders to some extent.From the financial situation,performance commitment and cash compensation have not improved Company X 's vitality and operating conditions,and the impairment of goodwill caused by the failure to meet performance commitment will further affect the company's profits.Poor profitability will certainly affect the interests of minority shareholders;From the perspective of market effect,performance compensation commitment only had a positive market effect when it was signed,and the market effect was negative when performance commitment fail to meet standards.Even if performance promiser company C compensated at this time,the market effect performance was still passive.Why performance compensation commitment can't really protect the interests of minority shareholders? This article believes that the high performance commitment established by major shareholders for self-interest motives is the root cause of poor protection,and builds the "major shareholder self-interest motives?high performance commitment?minority shareholder interests "influence path analysis framework.It is pointed out that under the current institutional environment where the investor protection mechanism is not perfect,major shareholders of both parties will act for selfinterest and create agency behavior through the establishment of high performance commitment,thereby infringing the interests of minority shareholders.Finally,the analysis of the behaviors of the major shareholders in the Merger and Acquisition of Company X verifies the rationality of the "influencing path of performance compensation commitment to the interests of minority shareholders under the selfinterest motive of major shareholders.The setting of high performance commitment will make it difficult for the underlying asset performance to meet the commitment standards,resulting in negative market reactions and great risks of goodwill impairment,which in turn affects the interests of minority shareholders;While at the same time,company X's shareholder investment institutions used high performance commitment to push up stock prices and got profits by means of equity pledges and stock reductions;Shareholders of Target Asset B received high M & A premiums through high performance commitment;Performance promiser passively performed compensation obligations to reduce default costs.In the end,major shareholders realized self-interest motives by setting high performance commitment,but passed on the risks of failure to meet performance commitment,goodwill impairment and stock price decline to the minority shareholders.Therefore,under the current environment in which the punishment mechanism is not perfect,performance commitment may have different effects on capital market.It does not necessarily encourage the target company to work hard,and it may not necessarily produce a positive market effect.It may become an effective means for major shareholders to tunnel listed companies and minority shareholders.In view of the shortcomings of performance commitment in practical applications,the following countermeasures and suggestions are proposed from the perspective of strengthening supervision,improving performance compensation commitment,and enhancing investor interest protection.For the supervisory agency,it is necessary to strengthen the supervision of performance commitment,including punish the breach of performance compensation commitment,improve the setting of performance commitment agreements,and require public companies to disclose information;For companies,it is necessary to set reasonable performance commitment targets,improve corporate governance to enhance the speaking power of minority shareholders,and strictly enforce performance commitment terms.