The Impact Of Share Buyback Of Listed Companies In China On The Financial Effect

Share buyback, aims at avoiding the regulation from the government, was initially originated in the United States. After nearly half a century of development, it has become a common capital operation mode in the western capital market. Share buyback refers to the company financing behavior that a cmpany buys back the shares issued by itself, so as to reduce the capital and modify the stock ownership structure.As a means of stock contraction,the stock buyback can be used to adjust the asset liability ratio and net asset income ratio of a company,thus lighten its operating pressure and at the same time build a positive image in the capital market.Beside,it is helpful in stabilizing the company's stock price and guarding against over speculation.Therefore, share buyback is considered to be an effective way to increase the intrinsic value by many listed companies. Statistics show that since the 1970s, the strict regulation on cash dividend payment by U.S. government has argued many companies to re-distribute their dividends in the way of share buyback. This phenomenon was followed by the rapid development of share buyback in the U.S.,the ratio of which in the company gross income raising from 4.8% in 1980 to 41.8% in 2000.80% of companies replace their cash dividend in 2000, this ratio being 31% in 1972.Also,ever since the 1990s,the scale and amount of share buyback has become larger and larger,as a means to cope with the growing hostile takeover. In October 1987,American stock market was overwhelmed by the stock masket disaster.Within two weeks, as many as 650 companies released their plan for share buyback.Citigroup claimed that it would buy back shares of $250 million. This act worked on stabilizing share price and enhancing the market confidence.In November,1989, GM released its plan of buying back shares worth $10 billion in the following 5 years. According to THE WALL STREET JOURNAL,S&P spent a record $367 billion on buying back shares. During the first season of 2006,S&P 500 companies paid $100 billion on share buyback,22% increasing than the corresponding period in 2005. During April and May,2005, IBM, Nokia and Motorola announced their respective share buyback plan. The board of Citigroup agreed to further buyback $15 billion of its shares. In the UK, from January, 1995 to the end of 2000, the total sum of share buyback reached￡3.4 millions. In Japan, Tokyo Stock Exchange claimed that it had bought back 4,200 billion yuan during April and May,2002, twice as much as the sum in 2001.China's capital market developed for decades, as an independent corporation and market competition of listed companies fully awared of share buyback by including various kinds of capital operation methods and tools, affected the company through the governance structure, capital structure and dividend policy to maximize shareholder value. Share buyback as capital operation methods and tools has adopted for China. China's earliest share buyback began in 1994, Shanghai lujiazui's company buyback 2 billion.Later,xiamen,the sky,changchun high-tech, refrigerator compression etc buyback large stocks of these enterprises, buyback objects except for state-owned outside h-shares and B shares. On June 6 in 2005, the China securities regulatory commission《the listed company intends to buy back its shares of social public administration measures (trial implementation)》was romulgated and implemented, along with a buyback of regulations, the buyback gradually prevailed, shares, HuaLing after steely pipeline, the eagle, Shanghai and recent events monufacture pharmaceutical etc listed companies have made share buyback.This text is from share buyback and financial effects related theory, introduces the meaning of the share buyback, types and mode,Secondly on share buyback financial effects are analyzed,it includes the substitution effect, dividends and capital structure of financial goals effects from some aspects such as effect,and introduces share buyback produce financial effects of basic theoretic and basic mode.The second section of states the share buyback effect of financial and reason the listed companies in China.Firstly it expounds share buyback positive influence on financial effect, Namely, be helpful for adjusting financial leverage; be helpful for optimizing the capital structure; improve the net assets yield;to share and conducive to the realization of alternative shares to maximize shareholder value.Then the share buyback accounts for financial effect of negative effects.Namely that increase funding risk; A large amount of cash expenditures, increase the risk of enterprise to pay;To manipulate profits and financial statements; Affecting creditors' interests; Harm the interests of small and medium shareholders and the negative effects of financial jointly. Finally the share buyback financial effects on the negative influence on the cause analysis.The third chapter through examples that the share buyback sky case, expounds share buyback sky of the positive and negative effects of finance, and the revelation of the share buyback sky. The fourth chapter are proposed to avoid share buyback produce negative effects of financial advice,for example,A multi-level financing channel is established; expanding share buyback payment method; standard stock repurchases disclosure;standard the share buyback program, scale and pricing;to solve the ownership structure unreasonable, and strive to achieve the same rights;to protect the interests of small and medium shareholders and creditors; strengthening the supervision of share buyback against malicious behaviour, perfecting share buyback of related laws and regulations.Although the listed companies in China compared with western countries share buyback fledgling in China, and its causes are different from the western countries, but already in company asset restructuring and stable company stock etc shows its unique function. I take qualitative analysis and quantitative analysis,on the basis of theoretical analysis, complementary suitable charts, and related cases auxiliary, In order to share buyback listed companies produce good financial effect, to promote China's capital market and the development and innovation of listed company has a positive meaning.