The Mitigation Effect of Performance Compensation Commitment on Information Asymmetry—Empirical Research Based on Sample from SME Board and GEM Market

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Abstract

This paper takes the sample of 823 M&A events in SME board and Growth Enterprise Market in 2012-2016, and examines the impact of performance compensation commitment on M&A performance from the perspective of information asymmetry. The empirical research in this paper finds that the larger the merger, the more likely it is that the acquisition company will adopt the performance compensation commitment; the higher the excess cash holding and the more concentrated the equity, the less likely it is for the acquirers to adopt the performance compensation commitment. The performance compensation commitment in M&A transactions can reveal the target companies’ value, effectively reduceing the degree of information asymmetry between the management and external investors, and significantly improveing M&A performance. Through further research, we find that the signal effect of share compensation is more obvious than the signal effect of cash compensation.

Authors

• Jidong Zhang, University of Wisconsin Eau Claire

• Meiqun Yin, Beijing International Studies University

• Jing Han, Winona State University