Please use this identifier to cite or link to this item: http://hdl.handle.net/20.500.11861/7832
Title: A catering perspective of performance commitment-evidence from acquisitions in China
Authors: Song, Di 
Dr. SHEN Na, Nell 
Su, Jun 
Issue Date: 2023
Source: Pacific-Basin Finance Journal, Apr. 2023, vol. 78, article no. 101987.
Journal: Pacific-Basin Finance Journal 
Abstract: Performance commitment (PC hereafter), as a mechanism to reduce information asymmetry, has been increasingly applied to the acquisitions and reorganizations of listed companies in China. This study uses catering theory to analyze PC. We propose that managers/controlling shareholders cater to the investors' preferences when deciding whether to adopt PC in acquisitions. PC adoption generates a higher abnormal return in the short run but a lower abnormal return in the long run. Managers/controlling shareholders are motivated to adopt PC to gain short-run benefits by selling stocks after PC's announcement. The study helps to deepen the understanding of performance commitment from a new perspective and contributes to the field of research that views managerial decisions as rational responses to investor sentiment. Our study shows the speculative short-termism effect of regulatory policy in the Chinese capital market, and managers/controlling shareholders capitalize on opportunities in the inefficient market via PC adoption.
Type: Peer Reviewed Journal Article
URI: http://hdl.handle.net/20.500.11861/7832
ISSN: 1879-0585
0927-538X
DOI: 10.1016/j.pacfin.2023.101987
Appears in Collections:Business Administration - Publication

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