Abstract
This study examines the effect of performance commitment agreements (PCAs) signed in merger and acquisition (M&A) on executives’ trading behaviors based on A-share listed companies in China during 2013–2021. We find that executives of listed companies with PCAs are more likely to reduce their stock holdings after the completion of the transaction relative to M&A transactions without performance commitments. When PCAs have higher coverage of performance commitments or a higher level of internal control, the executives of listed companies are less likely to use PCAs for arbitrage.
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