A Study On Earnings Management Behavior Of Company A During Performance Commitment Period

With the emergence of performance commitment,China’s listed companies have exposed many problems in the process of fulfilling their performance commitment.Behind the high valuation and high premium is the high commitment of performance: in order to maximize the value of the company,the acquirer will exceed the performance in the merger and acquisition.During the performance commitment period,the company’s performance growth rate far exceeded the average level of the market,which is against the logic and law of the market.A company fails to keep its promise.Therefore,in order to avoid the huge penalty,the target company seeks a higher premium to modify the financial data,and uses the earnings management means to set the line and accurate standards.With the gradual increase of the performance commitments of merger and acquisition companies,the amount of performance compensation between companies is also increasing year by year.From the beginning of 2015 to the end of 2019,the company chose 360 companies to merge and reorganize.It is worth mentioning that when 288 companies signed the performance commitment agreement,they chose the agreed performance indicators,the proportion reached 80%,and 82% of the companies met the requirements of the performance commitment agreement.However,step on the line standard of the enterprise is not a few,the situation is very serious.Nearly 60% of companies promise to fluctuate between 100% and 110%.Wipe line standard,accurate standard,piece together performance is also normal.Company A is A leading enterprise in the game industry.In 2017,it realized its performance commitment,but after the expiration of the performance commitment,the company’s performance declined significantly,its operating conditions suffered from internal and external troubles,and the stock faced A huge risk of delisting.Does Company A manage A surplus? What’s the point? What kind of earnings management method is used? The paper discusses the above problems in depth.First of all,the whole process of the event was sorted out and summarized the performance commitment.It was found that it realized the promised net profit during the performance commitment period,but the net profit decreased significantly after the expiration of the performance commitment,and it lost money for two consecutive years.Based on the annual financial statements and actual situation during the performance commitment period,this paper analyzes the business performance of Company A during the performance commitment period,and tests the profit management direction of the case company and the case company by establishing an Roychowdhury model,and identifies the specific behavior of the earnings management of the case company.Through empirical analysis,it is found that the high commitment,high valuation and high premium of Company A are the leading causes of profit management;Company A adopts various earnings management methods to realize its performance commitment;earnings management will have A great impact on the long-term development of Company A,mainly reflected in the continuous deterioration of Company A,the decline of profitability for several years,and significant damage to the rights and interests of small and medium investors.Finally,this paper gives some suggestions for m & a enterprises and relevant departments respectively: M & A companies should set reasonable performance commitment indicators,clarify strategies,prevent blind investment,and strengthen the supervision of the target companies.