The impact of insider-appointment on the fulfillment of M&A performance commitments: Based on the power-responsibility paradox

Abstract

In the context of exacerbating the power-responsibility paradox, this study investigates the impact of the acquirer's appointment of insiders to the target during the performance commitment period on fulfilling performance commitments. Using a hand-collected dataset from 2008 to 2022, we document that a higher proportion of acquirer-appointed insiders significantly enhances the fulfillment of performance commitments. Our result holds after a series of robustness tests. Further analysis reveals that this positive impact is more pronounced in unrelated, cross-regional M&As, cash-only compensation schemes, and when the acquirer exhibits superior internal control quality and stronger Confucian cultural influence. Moreover, the appointment of executives by the acquirer to the target, rather than directors and supervisors, significantly reduces the likelihood of performance deterioration after the commitment period. This finding indirectly suggests that such appointments do not transform performance commitments into a tool for collusion among M&A-related parties. From the perspective of the power-responsibility paradox, our research highlights that the appointment of insiders to the target during the commitment period is a critical factor influencing the fulfillment of performance commitments.