Geographical Proximity and M&A Performance Commitment Agreement
The study finds that distant acquirers are more likely to sign and commit to higher amounts due to the need to transfer risk and screen tar-gets.The results are particularly significant when the target is located in a province with poor legal,business and trust culture.Excluding the acquirer's market value management motives,the professional influence of financial advisors and the influence of subsidiaries in the same region,the findings remain significant.Further analysis shows that the internet environment and social media disclosure of the target companies,the hometown background of the CEO of the acquirer and the audit of the top 10 accounting firm help to mitigate this problem.Combined with the implementation results,it is found that signing performance commitments does not help distant acquirers to effectively screen high quality assets,but a transfer of asset pricing risk can be achieved through the compensation.Analyses focusing on the terms of the compensation confirm these conclusions.This study provides a plausible explanation for the popularity of performance commitments in China's M&A market from the perspective of geographical proximity and heterogeneous institutional environ-ments.Meanwhile,it provides a reference for improving the application and regulation of performance commitment compensation agreements in M&A trans-actions and optimizing investor decision-making.
万方数据
维普
