Research On Earnings Management Of Z Company Under M&A Performance Commitment

With the rapid development of the domestic economy,the continuous improvement of the capital market,and the continuous strengthening of policy support,more and more enterprises choose to use M&A to expand their scale,integrate industry resources,and seek strategic transformation.The information asymmetry and other problems in the process of M&A urge the acquirer and the acquiree to adopt performance compensation commitment to mitigate the risk caused by the overvaluation of the target enterprise.At the same time,it increases the pressure and motivation of the managers of the target enterprise and improves its enthusiasm to complete the performance compensation commitment.However,in actual cases,more and more target enterprises have performance reversal and stock price collapse during or after the performance compensation commitment period,which brings potential risks to listed companies and target enterprises and violates the original intention of the performance compensation commitment system.This paper chooses the use of the performance compensation commitment agreement in Y company’s merger and acquisition of Z company as a case.In this case,Z company adopts the income method for valuation,which has the characteristics of "overvalued value,high premium and high commitment",and the three-year performance commitment is "accurate and up to standard".Based on relevant theories,through the combination of theoretical analysis and case analysis,this paper selects the Jones model and Roychowdhury model of earnings management to test the earnings management of the target company of M&A,studies whether Z company has earnings management behavior in the M&A valuation stage and performance compensation commitment period and discusses the realization path and possible economic consequences of earnings management behavior.Through the research,this paper draws the following conclusions:(1)To achieve a high valuation and gain more from M&A,the shareholders of the target company have the motivation to carry out upward earnings management in the benchmark year of M&A evaluation.High premium M&A generally requires high-performance compensation commitment,which will further stimulate the target company to carry out earnings management in some ways during the performance compensation commitment period.(2)The performance compensation agreement with excessively high-performance indicators is easy to promote accurate compliance,while the accurate compliance achieved by the target company through earnings management,whether in the short term or long term,cannot facilitate sustainable development for the company,and even have a negative impact.Based on the above analysis,this paper reminds investors to pay attention to the real performance of "accurate and compliance" enterprises through research and puts forward optimization suggestions from three aspects: improve the performance compensation commitment system,optimize the asset evaluation mechanism,and regulators should strengthen the whole process supervision,to provide solid reference for investors,operators,and regulators.It is a total of 3 images,17 tables,references 60 in this paper.