Research On Performance Compensation Commitment、Earnings Management And The Economic Consequences

In order to improve the synergy effect and protect the interests of the acquirer,the regulatory authorities had introduced a performance compensation commitment as a protection mechanism in the growing mergers and acquisitions.With the increase in using the performance compensation commitments,the performance of pressure has skyrocketed,which leads to multiple issues.Performance compensation commitments are originally a means of protecting the interests of acquirers and minority shareholders,and motivating large shareholders and management,but now they have become a weapon that harms the company and the minority shareholders.In spite of the direct impact of non-compliance on the capital market,the "accurate compliance" events have also hidden some risks.If the performance compensation commitments are not set properly,shareholders and management will have a strong motivation for earnings management which means they can manipulate the accuracy of financial statements,misleading the judgment of investors,and damaging the company’s normal operations.At present,there are few researches focusing on the relationship between performance compensation commitments and earnings management.Issues like the intrinsic relationship of performance compensation commitments and earnings management and what enlightenment the economic consequences brings should be valued.Based on the background and the questions,this article firstly sorts out the existing literature about earnings management,performance compensation commitments,and the relationship between performance compensation commitments and earnings management.At the same time,performance compensation commitments’ institutional development and overall status are introduced,and the possible motivations and the ways of earnings management are theoretically analyzed.Next,the case section analyzes deeply in the use of comparative analysis method and quantitative research method.Finally,based on the research findings,this article comes up with corresponding suggestions.Descriptive statistics of overall status and theoretical analysis show the fact of frequent use of performance compensation commitments in the A-share market,the accurate compliance rate,the simplex index,the short commitment period and the effect of different compensation.First of all,the case of AORUIDE finds that the characteristics of performance compensation commitments such as high level of commitment,share compensation,and short commitment period will induce earnings management behavior.Secondly,the company with performance commitments uses a combination of accrual earnings management and real earnings management which are harder to detect,and methods of changing credit policy and M&A are widely used.Finally,signing performance compensation commitments will stimulate market response and bring temporary benefits,and earnings management will also improve corporate performance in the short term,but this behavior will affect future development and infringe the long-term interests of listed companies and minority shareholders.This article focuses on the earnings management perspective of performance compensation commitments,getting rid of the conventional research directions of risk prevention and accounting treatment.At the same time,the statistical descriptions of its application,compliance and content designing provide different perspectives,which enriches the current status data and also gives some inspiration.In addition,this article qualitatively and quantitatively analyzes and identifies the degree of earnings management based on a single company whose information is deeply dug,which distinguished from the existing literature of single research method and provides for similar situations to learn from.