Abstract
ABSTRACT This paper examines the effect of M&A compensation commitment on stock price crash risk using the setting of Chinese M&As that committed performance has been achieved during the commitment period. We observe an increase in stock price crash risk after the expiration of M&A compensation commitment, and the effect is more significant in companies whose committed performance precise completion. Further analyses show that the ex post stock price crash risk is more strengthened in companies with higher agency conflicts and SOEs, but the external governance roles, Big-4 auditors and analysts, can weaken this effect. The channel analysis shows that the bad news is that goodwill impairment loss after the expiration of the commitment period is released, leading to an increasing stock price crash risk. Overall, our finding shows that M&A compensation commitment has an ex post effect on stock price crash risk.
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