An Research Of The Role Of Non-profit Performance Commitments In Mergers And Acquisitions

As an important way of resource allocation in capital market,more and more listed companies choose to improve their core competitiveness through mergers and acquisitions.In order to prevent controlling shareholders manipulating transaction prices and transferring profits,the performance commitment system arises at the historic moment.In the establishment of performance commitment clauses,most of the target company’s net profit is the performance target.However,with the complexity of enterprise business,the types of performance commitment are constantly enriched.In addition to net profit,non-profit indicators such as operating income and accounts receivable,and even non-financial indicators such as product sales also begin to appear in commitment targets.Such diversified performance goal setting restrains the management behavior,and brings new risks and challenges to the enterprise operation because of the complexity of the betting mechanism.This paper takes Hengjian Holding’s merger and acquisition of East as the research object,analyzes Hengjian Holding ’s motivation for selecting three non-profit indicators of receivables,equity investment,and government subsidies as performance commitments,and evaluates the economic consequences of the merger.The study found that:(1)The performance commitment of a single profit did not take into account the company’s source of profit.Adding accounts receivable indicators to performance commitments will help to collect receivables and avoid operational risks.(2)The performance commitment of a single profit does not take into account the impact of some important equity investments on business operations.Adding equity investment indicators to performance commitments is conducive to promoting the investee to optimize operations.(3)The performance commitment of a single profit does not take into account the company’s source of profit and industry development.Adding a government subsidy indicator to the performance commitment is conducive to urging the acquiree to prudently accrue government subsidies and prevent performance manipulation.