Research On The Risk Of Financial Fraud Under Performance Commitment

In recent years,with the development and expansion of my country’s capital market,mergers and acquisitions have become increasingly common.Companies use this method to optimize their capital structure,expand their own scale,and extend their industrial chain.But not all mergers and acquisitions are successful,and there are not a few cases of failed mergers and acquisitions at home and abroad.Due to the existence of information asymmetry and other factors,the target party may hide its own unfavorable information when an enterprise conducts mergers and acquisitions,making the merger and acquisition party make wrong decisions.Therefore,the performance commitment is introduced into the merger agreement to guarantee the performance of the target party after the merger.In addition,the performance commitment can also send a positive signal to the outside world that the company’s future development is expected.Therefore,the introduction of performance commitments in M&A agreements has also become the norm.Theoretically,performance commitment,as a tool for risk prevention and control,can help reduce merger and acquisition risks caused by information asymmetry and other factors.But in fact,as performance commitment agreements are widely used in M&A transactions,it is not uncommon for performance commitments to fail to meet standards.This phenomenon shows that performance commitment also brings new risks to corporate mergers and acquisitions when preventing and controlling risks.In order to avoid compensation for failing to meet performance commitments,or even to prevent the entire group from being negatively affected by failing to meet performance commitments,some companies resort to financial fraud and other means to make performance commitments "reach" the target,which will not only damage the majority of small and medium-sized investments It will also affect the healthy development of the capital market.This paper selects the incident of Ya Tai Pharmaceutical’s merger and acquisition of Shanghai Xin Gao Feng as the case study.First,from the two periods of performance commitment signing and performance commitment performance,through some financial information to identify the financial fraud risks that may exist between the two parties of the merger and acquisition;secondly Using the three factors of the fraud triangle theory-pressure,opportunity and excuse,analyze the motivation of financial fraud,including performance commitment pressure,internal control failure,external auditor’s dereliction of duty,management’s excuse and so on.Finally,relevant suggestions are put forward to mergers and acquisitions,external regulators,third-party auditors and small and medium investors.In addition,through the analysis of M&A cases in Ya Tai pharmaceutical industry,this paper draws the following conclusions: 1.Excessive performance commitment value is the driving force of financial fraud;2.The single evaluation index of performance commitment creates opportunities for financial fraud;3.Performance commitment It may become a tool for conspiracy and fraud on both sides of mergers and acquisitions.