Analysis Of Financial Fraud Of The Commitment Party Under Performance Commitment

From 2014 to 2017,China entered the peak period of M&A.In these transactions,such as backdoor listing and mergers and acquisitions,the shadow of performance commitment can be seen everywhere.Performance commitment has a certain function of enhancing credit,which can effectively reduce the information barriers of both sides of the transaction,promote the progress of the transaction,and protect the rights and interests of the original shareholders.It is found that performance commitments can not guarantee the success of M&A.In M&A transactions with performance commitment,the completion rate of performance commitment of most target enterprises is concentrated between 100% and 110%,barely achieving the performance target.In order to prevent the compensation mechanism triggered by the failure of performance commitment,the target enterprise will use various ways to achieve the performance commitment target within the performance commitment period.Therefore,under the great operating pressure brought by high performance commitment,financial fraud often occurs in the target enterprises.This thesis focuses on the financial fraud cases in the Shenzhen Everich Supply Chain under the performance commitment,clarifies the relationship between the performance commitment and the financial fraud,and probes into the real reasons for the financial fraud committed by the promise side in the context of the performance commitment,with a view to provide recommendations to prevent corporate financial fraud.Under the above-mentioned research background and purpose,this thesis deeply studies the theoretical knowledge of performance commitment and financial fraud,introduces the connotation and function of performance commitment,the connotation and commonly used methods of financial fraud,the formation mechanism of financial fraud under performance commitment,The Fraud Triangle.At the same time,the author has read a lot of literature related to performance commitment and financial fraud.Through searching and collecting,the author finds that most researches on performance commitment and financial fraud are divisive,and there is little research on the relationship between performance commitment and financial fraud.By sorting out and summarizing,according to the previous research results of experts and scholars,it can be concluded that companies that make performance commitments have potential financial fraud risks,and the incentives are multifaceted.This thesis selects the case of M&A of Donli and Shenzhen Everich Supply Chain as the research object.Before the merger,Shenzhen Everich Supply Chain made a performance commitment to Donli.In the second year of the performance commitment period,Shenzhen Everich Supply Chain was found to have fraudulent behaviors,so this case is very typical for the reasons of financial fraud under the performance commitment.First,this thesis briefly introduces the general situation of Donli and Shenzhen Everich Supply Chain,reviews the specific content and specific implementation of the performance commitment made by Shenzhen Everich Supply Chain,and analyzes the financial fraud methods of Shenzhen Everich Supply Chain.Then,this thesis uses the Fraud Triangle Theory as the analytical framework to analyze the fraud pressure,fraud opportunities and fraud excuses in Shenzhen Everich Supply Chain.On the basis of in-depth study of the case,this thesis believes that the following fraud pressures existed in Shenzhen Everich Supply Chain: the financial pressure and operating pressure of the performance commitment party,the pressure of the overvaluation of Shenzhen Everich Supply Chain,and the pressure of performance commitment exceeding the actual operating capacity.Fraud opportunities in Shenzhen Everich Supply Chain were created by many parties: first,the equity of Shenzhen Everich Supply Chain is highly concentrated,which was not conducive to the disclosure of real performance;second,the authenticity of historical financial data in the supply chain industry was difficult to verify and audit.Third,the performance commitment period was short and the form is simple;fourth,Donli ignored the inspection of the commitment party and overly trusted the performance commitment;fifth,the non-related party enterprises cooperated with Shenzhen Everich Supply Chain;the tripartite intermediaries failed to perform their duties diligently.The excuse for fraud in the Shenzhen Everich Supply Chain was mainly that the management felt that the financial fraud in the Shenzhen Everich Supply Chain was reasonable and necessary.The financial fraud of Shenzhen Everich Supply Chain made this merger failure,and it also caused huge losses to Donli.Financial fraud is a stubborn disease in the capital market,and we cannot cure it at one time.The commitment party needs to strengthen self-prevention and be alert to the occurrence of financial fraud.For this reason,the commitment party needs to make a performance commitment that conforms to the actual situation of the enterprise,establish a correct profit concept,and optimize equity structure and improve the internal supervision mechanism.At the same time,the promised party and the third party should also strengthen supervision.The supervision suggestions to the promised party in this thesis are:change the transaction method of one-time payment of consideration in M&A transactions;extend the performance commitment period and design more flexible performance commitment terms;form a team of experts.Intermediaries should strengthen project quality management,undertake business prudently,and strengthen cooperation with the same industry.Finally,the regulatory authorities should strengthen the protection of the independence of audit institutions,track and monitor performance commitments,and increase the penalties for violations.