Research On The Impact Of Performance Commitment On Corporate Performance In Mergers And Acquisitions

With the continuous development of China’s capital market,the M&A and restructuring business has gradually matured and the relevant system has been gradually improved,and it has become common for enterprises to set performance commitments in M&A transactions.The performance commitment agreements set in M&A business have expired one after another in recent years to be honored,and it is easy to promise that it is difficult to perform.As the previous market frenzy gradually dissipates,more and more subject companies are unable to honor their promises,which has brought adverse impact to listed companies.In recent years,users are paying more and more attention to network security issues,the state has introduced many supporting policies,and the network security industry is developing rapidly.This paper takes Guohua Net Security’s M&A of Zhiyou Net Security as a case study and analyzes the impact of performance commitment on corporate M&A performance through event study method,index analysis method and EVA index based on information asymmetry theory,signaling theory,principal-agent theory and incentive theory,in order to provide relevant references for similar companies to use performance commitment in M&A.This paper firstly explains the background of the study,the significance of the study,the current status of research on performance commitment and the innovation points.Secondly,it introduces the concepts and theoretical foundations of performance commitment.Then,we introduce the basic information of both parties,explain the process of M&A,performance commitment and its realization,and sort out the motivation of performance commitment.Then,we analyze the impact of performance commitment on corporate performance.The study includes the direct impact of performance commitments and the market reaction caused by making performance commitments,meeting performance commitments,and not meeting performance commitments using the event study method,and analyzes the changes in financial performance caused by performance commitments in terms of solvency,operating capacity,profitability,and growth capacity,as well as the impact on enterprise value by calculating EVA.Finally,conclusions and insights are drawn in order to improve the application of performance commitment studies.By studying the impact of performance commitments on corporate performance in the process of Guohua Net Security’s M&A of Zhiyou Net Security,this paper obtains the following conclusions: First,performance commitments have a limited role in reducing M&A risk.Second,the signal of performance commitment announcement affects the stock price change.Third,the performance commitment does not meet the target affects the performance of listed companies.Fourth,performance commitments under high valuation may not enhance corporate value.Therefore,companies should reasonably determine the value of the underlying company,set performance commitments scientifically,set diversified performance commitment indicators,and choose flexible payment methods such as Earn-out.