Contingent cash crunch: How do performance commitments affect acquirer liquidity?

IF 6.3 2区经济学 Q1 BUSINESS, FINANCE

Research in International Business and Finance Pub Date : 2024-09-18 DOI:10.1016/j.ribaf.2024.102592

Kai Wu , Yufei Lu , Donghui Li

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Abstract

This paper investigates how performance commitment clauses in mergers and acquisitions (M&As) influence the corporate liquidity of acquiring firms. Using a comprehensive dataset of Chinese domestic M&A deals from 2008 to 2021, we find that acquisitions involving performance commitments correspond to lower corporate liquidity for acquirers in subsequent years. Difference-in-differences analysis, instrumental variables, and propensity score matching support a causal relationship. Furthermore, cross-sectional tests reveal that this negative association is amplified for nonstate ownership, weak governance, poor reporting quality, and low financial constraints. We find that performance commitments increase management optimism, providing insights into the mechanisms linking contingent deal structures with suboptimal liquidity policies and heightened financial distress. Our study suggests that the contingent contract structures in M&A deals drain corporate liquidity, leaving firms financially vulnerable.

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或有现金紧缩：业绩承诺如何影响收购方的流动性？

本文研究了并购（M&As）中的业绩承诺条款如何影响并购企业的企业流动性。利用 2008 年至 2021 年中国国内并购交易的综合数据集，我们发现涉及业绩承诺的并购会导致并购方随后几年的企业流动性降低。差异分析、工具变量和倾向得分匹配都支持这种因果关系。此外，横截面测试表明，在非国有所有权、治理薄弱、报告质量差和财务约束低的情况下，这种负相关关系会被放大。我们发现，业绩承诺会增加管理层的乐观情绪，这为我们揭示或有交易结构与次优流动性政策和财务困境加剧之间的关联机制提供了启示。我们的研究表明，并购交易中的或有合同结构会消耗企业的流动性，使企业在财务上处于弱势。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Research in International Business and Finance BUSINESS, FINANCE-

CiteScore

11.20

自引率

9.20%

发文量

240

期刊介绍： Research in International Business and Finance (RIBAF) seeks to consolidate its position as a premier scholarly vehicle of academic finance. The Journal publishes high quality, insightful, well-written papers that explore current and new issues in international finance. Papers that foster dialogue, innovation, and intellectual risk-taking in financial studies; as well as shed light on the interaction between finance and broader societal concerns are particularly appreciated. The Journal welcomes submissions that seek to expand the boundaries of academic finance and otherwise challenge the discipline. Papers studying finance using a variety of methodologies; as well as interdisciplinary studies will be considered for publication. Papers that examine topical issues using extensive international data sets are welcome. Single-country studies can also be considered for publication provided that they develop novel methodological and theoretical approaches or fall within the Journal''s priority themes. It is especially important that single-country studies communicate to the reader why the particular chosen country is especially relevant to the issue being investigated. [...] The scope of topics that are most interesting to RIBAF readers include the following: -Financial markets and institutions -Financial practices and sustainability -The impact of national culture on finance -The impact of formal and informal institutions on finance -Privatizations, public financing, and nonprofit issues in finance -Interdisciplinary financial studies -Finance and international development -International financial crises and regulation -Financialization studies -International financial integration and architecture -Behavioral aspects in finance -Consumer finance -Methodologies and conceptualization issues related to finance