The Research On Stock Repurchase And Cost Of Fund And Related Issues Of Taiwan Stock-listed Companies

Financial strategy,investment strategy and dividend policy are top three major tasks of financial management in each company.To protect the interest of shareholders,most stock-listed company executed stock repurchase mechanism to buy back it's own stocks in 2008 financial crisis.In 2014,the maximum amount of treasury buyback transaction belongs to Apple,he spent around 560 billion to buy its shares.At the same time,Samsung announce its plan to buyback at the amount of 2.2 trillion(equivalent to USD 199 million)within 3 months as well.Hyundai do it in the same way.What's the miracle of “Treasury stock” ?Referred to the article of Blundell-Wignall & Roulet published in OECD Journal 2013,their empirical evidence proved the variety of cost of equity and debt will have influence on the strategy of capital expenditure and stock repurchase when take nearly 5000 companies as example among MSCI & USA etc.According to their empirical evidence shown the growth rate of GDP did not rise as the money supply increased.What's the main reason for this phenomena ?First of all,the most important one is that the money will be used to repurchase its shares in the stock market,to declare the stock price was underpriced;secondly,the idle money was going to be invested in high risk-high profit securities;third,maybe the company did not have find good investment opportunities or there are too much free cash flow on hand.Theoretically,a better investment should have better net present value at least,that means,a so-called reasonable investor should choose an investment project with higher ROE or lower risk among others.This study try to focuse on the stock repurchase issue,and there are so many literatures or essay discuss the topics related to the intention or the performance behind announcement of buyback in the past years,but few focused in the field of effects from financial crisis happened regarding to stock repurchase and capital expenditure.Therefore,our second motivation in the essay followed the infrastructure of Blundell's,and take the stock –listed companies in Taiwan as the samples to search the relation and influence caused by cost of equity and cost of debt etc.to stock buyback.It's the Research's innovation and contribution as well.In the beginning,we propose 4 kinds of study purposes and core of the essay,then we bring forward 5 hypotheses to respond to 4 purposes,then go to the empirical process to test the hypotheses.Following are four purposes and objectives of our study based on the background information and motivation:1.To explore the effect on the change of cost of equity and debt respectively on stock repurchase strategy.2.To explore the effect on the decision making of stock repurchase upon the case of high percentage of shareholding of directors and supervisors.3.To explore the effect on the decision making of stock repurchase upon the case of high percentage of collateral by shares of directors and supervisors.4.To explore the effect of Free Cash Flow of company on stock repurchase decision making.In the empirical test,Logit Test are utilized in our statistic verification.We used a statistic tests method to explore the change on cost of equity and debt before and after 2008 financial crisis,to realize whether it will or not to change their investment decision due to the crisis.We expect to be aware more information of capital market and related regulation of Treasury stock,and provide more concrete suggestion to the Government or Authority in Charge when amend the law of regulations,or to the industry.Empirical samples comprised of all stock-listed companies which registered within 2001 to 2014,we gathered all necessary data from the data base to check its completeness,then go to proceed to do the verification.Owing to the phenomena of increasing enlarge of residual variance,we revised and use yearly dummy variables to control the testing.From the literitures and essay,there has many bias incurred when inferring the statistic results and conclusion,therefore,panel data regression model was used in research the cross-sectional and time series data in the statistic model,to reveal estimation more efficiently.According to 4 items of relevant questions and hypotheses,we draw up the following important hypotheses:1.The lower the cost of debt,the more of the stock repurchase,but it's not supported;2.The lower of cost of equity,the more of stock repurchase;3.The lower of shareholding of directors and supervisors,the company inclined to implement more on stock repurchase;4.The larger of the Free cash flow,the company inclined to implement more on stock repurchase;5.The larger of the cash dividend per share,the company inclined to implement more on stock repurchase;This study is based on the relevant articles and reviews finally then decide to implement a empirical test by data collecting and data mining,to gather the results and discussion which summarized as follows:1.The possibility of execution of stock repurchase is not expected to increase, when cost of debt decrease,but,it isn't the case in cost of equity,ie.stock repurchase is always decrease when cost of equity increase.2.The more increasingly enlarge of the shareholding of directors and supervisors,the intention to buyback increase in the same direction,3.The more increasingly enlarge of the collateral of shareholding of directors and supervisors,the intention to buyback increase in the same direction,4.The more increasingly enlarge of the free cash flow,the intention to buyback increase in the same direction,5.The higher of cash dividend declared,the less intention to buyback decrease in the oppisite direction,...