Research On The Impact Of Performance Compensation Commitment On Enterprise Value

The 1980s saw the gradual introduction of private equity investment to China,which had its roots in the United States.At present,it has become a widely used financing method in domestic and foreign capital markets.Private equity investment has not only widened the financing avenues for small and medium-sized enterprises,but also hastened their growth due to its professional management and capital operation capabilities.Performance compensation commitment,a special clause in the private equity investment process,has been gradually incorporated into the domestic capital market since 2003 as a gradual addition.The successful application of performance compensation commitment can bring win-win for investment institutions and financing enterprises,but the failure of application will bring huge losses to enterprises,and even lead to the transfer of corporate control to private equity investors.Therefore,as an incomplete contract,performance compensation commitment still has certain risks in its use.Therefore,the research on signing performance compensation commitment in the process of private equity investment can provide reference for small and medium-sized enterprises that need financing urgently.Domestic and foreign scholars’ research on performance compensation commitment mainly focuses on the definition,signing motivation and accounting treatment of performance compensation commitment,as well as the case study on the legality of performance compensation commitment agreement,but there are few studies on signing performance compensation commitment in the process of private equity investment.Therefore,this paper takes Shenzhen Venture Capital Investment Linkage Tongda as the case study object,and analyzes the motivation of signing performance compensation commitment agreement between Shenzhen Venture Capital and Linkage Tongda,as well as the influence and path of signing performance compensation commitment on enterprise value.The results show that signing an agreement between Shenzhen Venture Capital and Linkage Access can not only meet the financing needs of Linkage Access and obtain value-added services for it,but also reduce the information asymmetry risk between Shenzhen Venture Capital and Linkage Access and improve financing efficiency.By further comparing the changes of enterprise value before and after the performance compensation commitment period of Linked Access and Weiyou Media,this paper concludes that the performance compensation commitment can enhance the enterprise value to a certain extent during the agreement period,but it may have a negative impact on the enterprise value after the agreement expires.During the agreement period,the performance compensation commitment mainly affects the enterprise value through regulating and restricting the linkage access to major shareholders,encouraging and restricting its management and employees,and perfecting its strategic plan.The conclusion of this paper provides some enlightenment for small and medium-sized enterprises and private equity investment to apply performance compensation commitment agreement.At the theoretical level,the research of this paper enriches the relevant literature on performance compensation commitment and enterprise value.On the practical level,it provides reference for both investors and financiers to reasonably design the terms of performance compensation commitment agreement and achieve win-win situation: on the one hand,it provides reference for private equity investment institutions to rationally use performance compensation commitment agreement to reduce the risk of information asymmetry and safeguard their own interests;On the other hand,it provides enlightenment for financing enterprises how to use performance compensation commitment agreement to enhance enterprise value.