Study On The Application Of Non-Profit Index In Performance Commitment

With the rapid development of China's economy,especially after the "One Belt,One Road" development strategy was put forward,the competitive pressure on the real enterprises in our country is increasing.Merger and reorganization has become an important way for enterprises to enhance their competitiveness and seek long-term development.However,mergers and acquisitions in promoting the rapid development of enterprises may also cause huge losses to small and medium-sized investors.In order to prevent the controlling shareholders or actual controllers from maliciously manipulating the transaction price through the income method,and injecting inferior assets into the listed companies in the reorganization and restructuring to realize the transfer of benefits,the system of performance commitment emerges as the times require.On the one hand,performance commitment system can effectively restrain asset valuation bubble caused by income law,on the other hand,it can effectively protect the legitimate rights and interests of minority shareholders of listed companies,which is of great significance for enhancing the competitiveness of listed companies and maintaining the order of capital market.However,with the gradual passage of time and the gradual termination of the commitment period,the performance commitment system has also exposed some problems.This has brought new and stronger motives for the target enterprises to carry out earnings management,profit manipulation and even financial fraud.There is a certain risk of derivative of a single profit indicator in the performance commitment:(1)the target enterprises may change its sales policy and relax its credit conditions to increase its operating income so as to fulfill the performance promise,which will induce the risk of accounts receivable of the target enterprises;(2)the target enterprises may increase the non-core business income through the short-term behavior such as asset disposal,merger and reorganization to fulfill the performance promise,which will induce the operating short-sighted risk of the target enterprises;(3)the target enterprises may increase its revenue through financial fraud and fictitious income so as to fulfill its performance commitment,which will induce the financial fraud risk of the target enterprise.The existence of these risks will affect the cash guarantee,continuity and reliability of the performance of the target enterprises and seriously damage the performance of the target enterprises,contrary to the original intention of the performance commitment system to guarantee the rights and interests of small and medium-sized investors.At the same time,compared with the single profit indicator,rich non-profit indicators tend to be more restrictive than the single profit indicators in restricting the operation of the enterprises,effectively preventing the financial risks of the enterprises and scientifically reflecting the performance quality of the enterprises.Therefore,based on a systematic review of the institutional background and relevant literature,this paper attempts to explore the application of non-profit indicators in performance commitment agreements through a comparative analysis of four cases,and study the protection of non-profit indicators against the performance of the target companies,seek ways to prevent derivative risk from performance commitment system,so that the performance promises system really plays a role in ensuring trade fair pricing and protecting small and medium-sized investors.The research in this paper shows that the application of non-profit indicators in the performance commitment agreement can restrain the business activities of the target enterprises,prevent the derivative risks of performance commitments and ensure the performance quality of the target enterprises:(1)the setting of accounts receivable indicators will force the subject enterprises to formulate strict receivable management measures,strengthen the management of accounts receivable in advance,during and after the three stages,improve the turnover of accounts receivable,speed up the recovery of accounts receivable and reduce the credit losses of the target enterprises,so as to reduce the risk of accounts receivable and effectively improve the cash guarantee of business performance of the subject enterprises;(2)the setting of main business indicators will force the target enterprises to focus on improving their core capabilities,preventing short-term behaviors such as blind diversification of investment and disposal of quality assets,continuously increasing the contribution rate of main businesses and enhancing the stability and sustainability of the profitability of the target enterprises,so as to reduce the risk of operating short-sighted and effectively improve the continuity of business performance of the target enterprises;(3)The setting of customer indicators has forced the target enterprises to strengthen their emphasis on customer resources,strive to increase the number of customers to expand their sources of revenue,reduce the concentration of customers and improve the bargaining power of the target enterprises,fundamentally improve the profitability and operating performance of the target enterprises,and also is a good complement to the profit data,thereby reducing the risk of financial fraud,and improve the reliability of business performance of the target enterprise.Strengthening the application of non-profit indicators in the performance commitment agreement can improve the performance of the target enterprises and prevent the performance of the target enterprises from changing their face so as to give better play to the system of performance promises to prevent malicious manipulation of asset valuation and protection of the rights and interests of small and medium-sized investors.