Case Study On Stock Repurchase Of Yahua Group

Stock repurchase originated in the United States in the 1950 s.With the development of capital market,it has become a common capital operation method for listed companies.As an alternative to cash dividends,stock repurchase has the functions of stabilizing stock price,improving market value,increasing financial flexibility,adjusting capital structure,etc.Stock repurchase started late in China,the scale of stock repurchase is small initially,and it is mainly agreement repurchase.In June 2005,China officially opened the public market stock repurchase.With the continuous development of China’s capital market,the importance of stock buyback is becoming more and more prominent.The state has also relaxed the restrictions on the buyback behavior of listed companies again and again at the policy level.Since then,the number of Listed Companies in China’s stock buyback has greatly increased from the number to the scale of buyback.In 2018,the company law of China revised the relevant provisions on Share buyback in Article 142,improved the situation of permitted buyback,added "shares used to convert convertible corporate bonds issued by listed companies" and so on,which is the first time to combine share buyback with capital market refinancing,triggering a new round of buyback boom.After the new deal,Yahua Group,as the first listed company to complete share buyback and use the buyback shares for its convertible bonds issued in the future,has successfully issued convertible bonds within a short time after the buyback,the motivation and impact of its stock buyback behavior deserve attention.This paper takes the stock repurchase of Yahua Group as the research object,using case analysis and literature research to analyze the motivation and effect of this stock repurchase of Yahua Group.Firstly,relevant literature was sorted out from the two aspects of repurchase motivation and repurchase effect,the definition and types of stock repurchase were defined,the basic repurchase theories such as signal transmission theory and principal-agent theory were explained,and the background of China’s stock repurchase system were expounded.Secondly,the repurchase case of Yahua Group was introduced,the repurchase motivation was deeply explored from multiple perspectives,and the market effect,financial effect and hidden effect were deeply analyzed by using the event study method and financial analysis method.Finally,on the basis of summarizing the conclusions of Yahua Group’s share repurchase case study,this paper proposes relevant suggestions for investors and regulators,so as to give play to the advantages of repurchase and promote the healthy development of the capital market.This paper studies the case of stock buyback of Yahua Group,and draws the following conclusions:(1)the motives of buyback of listed companies are becoming more diversified and complicated.The motives of this buyback of Yahua Group are mainly to promote the return of corporate value,reduce the tax burden of shareholders,increase financial flexibility,and help the smooth issuance of convertible bonds;(2)the market effect of stock buyback is more significant,After the buyback,the stock price of Yahua Group has significantly improved,and the market has a positive reaction;(3)the stock buyback will cause a negative financial effect,but it can temporarily enhance the enterprise value.After the buyback,the profitability and solvency of Yahua Group declined,while the enterprise value has been increased;(4)the combination of stock repurchase and refinancing can increase the flexibility of financing process of listed companies.Yahua Group arranges the repurchase and issuance of convertible bonds in a short period of time,leaving room for the company to implement financial strategies.Through the successful implementation of stock buyback,the company’s established goals have been achieved.Based on this,this paper puts forward the following suggestions:(1)investors should identify the causes of buyback and avoid short-sighted behavior;(2)regulators should strengthen the supervision of stock buyback behavior and improve relevant systems;(3)in the process of repairing the buyback system,we should step by step to match the development of China’s capital market.