The Research On Reasons And Influence Of Incomplete Performance Commitment In Enterprise Mergers And Acquisitions

At present,there is a wave of M & A in China.M & A has become the main way for enterprises to extend their business and improve their competitiveness.There are many risks behind M & A transactions.In this context,the performance commitment compensation mechanism came into being.However,signing the performance commitment compensation agreement does not mean that the risks in M & A transactions no longer exist,and some application sequelae are beginning to appear.There are frequent cases of incomplete performance commitments,and both sides of mergers and acquisitions resort to the court from time to time.The phenomenon of poor performance commitment has become a problem that needs high attention in China’s capital market.Many scholars began to study the application field of performance commitment.Based on this background,this paper expects to explore the main reasons for the failure of performance commitment through case studies,and explore its subsequent negative impact,in order to alert the public,put forward improvement suggestions for the reasons for the failure of performance commitment,and explore the direction of system improvement in the future.Therefore,this paper takes the unfinished case of Zotye Auto performance commitment as the research object.Through the analysis of the case,this paper discusses the reasons and impact of the unfinished performance commitment,judges whether the unfinished performance commitment has a negative impact on the enterprise,and puts forward universal improvement suggestions according to the reasons for the unfinished performance commitment,so that the performance commitment agreement can be widely and flexibly applied to the M & a market.Firstly,this paper refers to a large number of literature on performance commitment,understands the theoretical knowledge about the compensation mechanism of performance commitment,introduces the relevant theories applied in the follow-up case analysis,summarizes the setting motivation of performance commitment and the reasons for the unfinished performance commitment from the logical level,and discusses three reasons for the unfinished performance commitment: the acquiree pursues short-term interests,the design of performance commitment is unreasonable,The performance commitment supervision system is not perfect,and effective suggestions are put forward in the "policy suggestions".Then,this paper combs the current situation of China’s M & a market and the application of performance commitment,and summarizes the problems existing in the application of performance commitment: first,the unfinished rate of performance commitment increases year by year;Second,the unfulfilled rate of performance commitment increases with the delay of commitment time;Third,the fulfillment rate of performance compensation has decreased year by year;Fourth,the performance commitment of "accurate compliance" accounts for a relatively high proportion;Fifth,the performance of listed companies fell sharply after the expiration of the commitment.This proves that performance commitment has played an important role in China’s capital market,but it needs to improve the system and standardize and guide.After that,this paper introduces the details of Zotye Auto M & A case,and analyzes the reasons and impact of the unfinished performance commitment agreement.This paper finds that there are three main reasons why the performance commitment agreement in this case has not been completed:(1)the lack of pre merger feasibility study.In this M & A,Jinma did not focus on the potential factors causing serious decline in performance,and did not conduct an effective feasibility study in the early stage of M & A.The sharp decline in the market outlook of the automotive industry,the tightening of subsidy policies for new energy vehicles and the difficulty in digesting "snake swallowing elephant" mergers and acquisitions all lay potential hidden dangers for the completion of performance commitments.Second,the integrated operation did not achieve the expected effect.Both sides of the merger and acquisition adopted the "snake swallowing elephant" type of merger and acquisition before the merger and acquisition,while the operating resources of Jinma Co.,Ltd.can not ensure the subsequent benign operation.At the same time,the lack of independent research and development ability of Zotye Auto is the most important reason for the sharp decline in performance.(2)The management pursues short-term interests.First,the two sides of M & A are suspected of transferring interests.By adopting the income method and signing a high performance commitment agreement,the M & a valuation is improved and obstacles are set for the completion of performance commitments;Second,the enterprise blindly imitates others,lacks independent research and development ability,and is finally abandoned by the market.(3)There are problems in the content design of performance commitment.The high amount of performance commitment target,the single performance commitment evaluation index and the difficulty in implementing performance commitment compensation measures all make it difficult for Zotye Auto to achieve the performance target and bring great gambling risk to Zotye Auto.The unfinished performance commitment agreement has had a significant negative impact on the stock price,financial performance and shareholders of Zotye Auto.It can be said that the performance commitment agreement did not play its due risk aversion role in this M & a transaction.The specific impact is as follows:(1)it has a negative impact on the rise and fall trend of the share price of listed companies.Through the event research method,this paper studies the impact of the event of incomplete performance commitment on the stock price of Zotye Auto,and finds that the incomplete performance commitment has brought significant negative effects on the stock price,and the excess return and cumulative excess return of Zotye Auto have fallen sharply.(2)Have a negative impact on the company’s financial performance.Through the financial index analysis method,this paper finds that the incomplete performance commitment also has a great negative impact on the company’s profitability,operation ability,growth ability and solvency,and all financial indicators show a downward trend.(3)Have a negative impact on the company’s shareholders.After the performance fails to meet the standard,the company’s share price falls sharply due to the provision of goodwill impairment,and it is unable to pay cash dividends,which proves that the incomplete performance commitment damages the interests of shareholders.Finally,based on the case analysis,this paper puts forward corresponding policy suggestions for the reasons why the performance commitment has not been completed:(1)when signing the performance commitment,we need to design and improve its content,ensure to improve the indicators of the gambling agreement,establish reasonable performance objectives and set up the performance warning mechanism;(2)Before M & A,listed companies should carefully evaluate the development potential of the underlying assets and integrate and use a variety of risk prevention mechanisms;(3)Regulators should take the initiative to assume the responsibility of supervision and management,strengthen the supervision of asset appraisal institutions,improve the information disclosure system of the target enterprise,and implement the performance commitment responsibility system.It is hoped that the case study of this paper can provide some suggestions for the improvement of China’s performance commitment policy and point out the direction for the application research of performance commitment in the future.