Abstract

This study analyzes the effect of corporate external guarantees on M&A performance commitments using a research sample of Chinese A-share listed companies from 2008 to 2022. The study finds that listed companies are more likely to sign performance commitments in M&As and sign higher performance commitments when the proportion of corporate external guarantees is higher. It has been found that corporate external guarantees have a hollowing-out effect compared to the governance effect of corporate guarantees. The higher the proportion of external guarantees, the more insider self-interest behavior exacerbates the financing constraint problem of the enterprise. To alleviate financing constraints, controlling shareholders have a stronger incentive for market value management by signing performance commitments. The analysis of heterogeneity reveals that when management shareholding is low and the two rights of the company are highly separated, the proportion of corporate external guarantees has a more significant effect on M&A performance commitments. This study's findings have reference value for financial institutions when making credit decisions and for regulators to improve the efficiency of M&A supervision.

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