Abstract: In recent years, the performance commitment of Chinese enterprises after high price M&A has become a mess, in which earnings management has become a common means for the target enterprises to avoid performance commitment compensation obligations.Based on the sample of target companies listed on the New Third Board from 2013 to 2017, this paper applies expectation theory to the analysis of negative effects of performance commitment in M&A, and studies the relationship between performance commitment system and earnings management of target enterprises.The empirical results show that the signing of performance commitment significantly improves the earnings management level of the target enterprise after M&A. Among them, the performance growth rate and share compensation mode of commitment, as important terms of performance commitment, have a significantly positive impact on earnings management level after M&A.Further research shows that the target side′s executive equity incentive strengthens the earnings management level induced by performance commitment; the target party′s high industry competition situation significantly strengthens the positive correlation between performance commitment and earnings management after M&A.The above conclusions show that the rapid development and wide application of performance commitment system has limited constraints on the target enterprises, but its negative effects should not be ignored, investors should rationally understand and grasp; the regulatory authorities should further improve the relevant systems to promote the optimization of the performance commitment scheme and operation norms of M&A transactions.

Key words: expectation theory, performance commitment, earnings management, equity incentive, competitive situation