Performance Compensation Commitment in Mergers and Acquisitions

The impact of performance compensation commitments on mergers and acquisitions (M&As) has been widely discussed, but no consistent conclusions. By investigating M&A events among A-share firms from 2011–2015, we found an inverted U-shaped relationship between performance. PSM is firstly used to select a paired sample firms’ signing commitments, which test the incentive effect commitments. Secondly, different paths commitment are tested empirically. study that: (1) agreements more likely increase price, resulting in “high premium”; (2) premiums helpful improve short-term However, long run, reduce performance, means that have This enriches our understanding about important implications for institutional construction protection small medium-sized businesses.