Impact of performance commitment in mergers and acquisitions on trade credit policy: evidence from China

Haiyun Ma, Deshuai Hou and Xiaojing Chang

Asia-Pacific Journal of Accounting & Economics, 2024, vol. 31, issue 4, 521-539

Abstract: This study examines the incentive effect of performance commitments in mergers and acquisitions and discovers that performance commitments increase the supply of trade credit and that seeking profitability is the impact mechanism. According to our cross-sectional analyses, the positive impact of performance commitment on trade credit is more pronounced for firms located in low-marketization regions with fierce market competition, high corporate risk, low internal control quality, low audit quality, or state-owned enterprises. Furthermore, our study reveals that bad debt losses and earnings management rise in tandem with trade credit. This research contributes to the literature on Chinese-specific earnouts.

Date: 2024
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DOI: 10.1080/16081625.2023.2194895

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Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

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