Backdoor Listing Performance Commitment And Earnings Management

Because of the complicated IPO listing process and harsh conditions,backdoor listing has become the choice of many enterprises.In the actual operation of backdoor listing,in order to improve the valuation,alleviate the problem of information asymmetry and facilitate the successful adoption of the trading scheme,performance commitment,as a supplementary agreement of backdoor trading,has been widely used in practice.Because of information asymmetry,performance promises may also be abused.Actually,high valuation and high performance commitment are common occurrences in transactions.When the industry is in recession and the operation is not smooth,enterprises may adopt earnings management measures to improve their“performance” in a short period of time in order to achieve the goal of high performance commitment.In the long run,earnings management will affect investor confidence,thereby reducing the enterprise value.Due to the particularity of high valuation and “light assets” in the cultural media(film and television)industry,the behavior of high performance commitment and earnings management is more obvious.Therefore,it is of great significance to choose the cultural media industry as the research object.This paper selects H&R Century Pictures Co.Ltd as a case company to explore the relationship among performance commitment,earnings management behavior and consequences in high backdoor listing.are Information asymmetry theory,signal transmission theory and principal-agent theory are theoretical supports.The main logic is “To pass the backdoor scheme as soon as possible”-“High performance commitment-hard to achieve performance”-“Earnings management”-“Accurate standards”-“Economic consequences”.Combining theory with practice,this paper sorts out the particularity of relevant literature and cultural media industry in the first place,and then introduces the background of the case company and its backdoor listing,expounds the motivation,scheme and completion of the performance commitment of the case company.Secondly,it identifies the motivation and behavior of the case company’s earnings management.Thirdly,from the dimensions of moral risk,market effect,core competitiveness and financial effect,the paper studies the economic consequences of earnings management of case companies.Because of the serious short-term overdraft,more importantly,the worries and expectations of other subjects in the market about the moral risk of the actual controllers affect the confidence of investors,reduce the core competitiveness,and lead to the deterioration of financial indicators.And last,according to the foregoing,a conclusion is drawn and corresponding suggestions are put forward.Taking H&R Century Pictures Co.,Ltd,which is characterized by “high performance commitment”,“accurate compliance” and “changing face in performance” as a case study,this paper studies the cultural media industry with serious earnings management behavior,broadens the application of signal transmission theory in this field.It expounds the earnings management behavior under the promise of high performance,and further reflects that earnings management behavior has considerable harm to the long-term development of the company through the market’s concerns about the moral hazard of the actual controller.