Research On The Motivation And Economic Consequences Of Financial Fraud Of The Acquired Party Under The Background Of Performance Commitment

In recent years,with the gradual improvement of the capital market,enterprises generally carry out extension development through mergers and acquisitions.In the process of mergers and acquisitions,setting performance commitment is a kind of merger contract mechanism that enterprises tend to choose.Performance commitment mechanism can motivate enterprise management and promote reasonable adjustment of valuation to a certain extent.However,in recent years,the phenomenon of high premium and high performance commitment occurs frequently in the M&A market,which leads to the failure of some enterprises to achieve performance targets under the condition of their own profitability,thus generating new risks.Enterprises that have made performance commitments are faced with performance pressure.In order to achieve performance targets and avoid triggering compensation clauses,the management chooses radical methods,earnings management and even financial fraud,which creates the appearance of excellent performance of enterprises.Such behavior has a negative impact on investors,and at the same time,it also brings impact on the orderly operation of merger and reorganization activities in the capital market.This paper selects the acquisition of Lianshuo Technology as a case study,and analyzes the financial fraud behavior of the target enterprise from the perspective of performance commitment,mainly involving the research on the motives of financial fraud and the economic consequences to the acquirer,so as to propose relevant risk prevention measures for financial fraud in the context of performance commitment.The research conclusions of this paper mainly have the following points:(1)The target enterprise attracts investors through high performance commitment and enhances investors’ confidence in its future profitability,but at the same time,there are huge risks behind the high performance commitment brought by high valuation,once the operating conditions and profitability level of the target enterprise cannot meet the performance commitment indicators,then the management is prone to financial fraud under the motivation to avoid triggering compensation clauses or completing contracts,etc.,and create the appearance of good business conditions by whitewashing financial data.(2)In the actual implementation of the performance commitment mechanism,the indicators are too single.Net profit as a performance appraisal standard,easy to make managers short-sighted behavior,in the performance commitment process,in order to obtain huge returns in the short term,to achieve performance commitment,the management of the target enterprise is very prone to earnings management and even financial fraud to ensure the completion of a single indicator.Once the performance commitment period ends,the target enterprise may change its performance.(3)The relevant regulatory authorities have mandatory provisions on enterprises with performance commitments,requiring them to disclose their performance every year,and if they fail to disclose or fail to perform due to poor corporate management,then the securities regulatory authority will intervene in the investigation.Therefore,in order to circumvent supervision,the target enterprise resorts to financial fraud when it cannot meet the standard,so as to avoid the negative impact of default.Based on the results of this case study,this paper finally draws enlightenment from the aspects of preventing high valuation risk,setting reasonable performance commitment,and strengthening external supervision by China Securities Regulatory Commission.With the help of this case,it is hoped that all enterprises can reasonably set up performance commitments before M&A,so as to promote the good operation of M&A market.