An Empirical Study On Share Repurchases Of Chinese Listed Companies

Share repurchase is a common capital operating method in the western capital market, which is a way to reduce capital and adjust the equity structure of listed companies through buying its own stocks. As a way of equity contraction, stock repurchase involves capital structure and dividend policies of listed companies thus it can improve their internal stock value. Share repurchase appeared relatively late in our country, but with the promotion of economic reform in our country, share repurchase began to rise gradually. On one hand, share repurchase as an effective way of reducing stated-owned equity has become an important method of making our listed companies governing structure perfect; On the other hand, in order to promote the reform, China Securities Regulatory Commission allows listed companies to repurchase circulated stocks, the number of share repurchase increases notably. So at recent share separation reform periods, the era"circulating completely"will come soon, if the problematic Chinese listed companies can't know and employ such innovative tool, it undoubtedly means that they will lose one useful"treasured sword". Therefore, the further investigation seems particularly urgent to develop theory and guide practice. This article, using the empirical method, investigated the relevant questions of share repurchase of listed corporations in our country has very important theoretical and practical meaning.The research of share repurchase has been receiving the concern of western theory all the time, the results of research are authoritative. The study on share repurchase of foreign existing literature is mainly from three respects such as the motivation of share repurchase, the market reaction and the relative influencing factors, the impact on company's performance. There exist 7 motivation hypotheses. Traditional signaling hypothesis and free cash flow hypothesis have gained the most approval. And the market reaction of share repurchase announcement basically has got identical conclusion in the west, there exists positive reaction to the announcement of share repurchase. The market reaction is influenced by many factors such as the shareholding ratio of the insider of company, b/m and the scale, frequency, opportunity of share repurchase. The influence of share repurchase on the company's performance hasn't got identical conclusion yet.The history of share repurchase in our country is relatively short, because of the restriction of the sample quantity, the study has just started. Most relevant literatures concentrate on the qualitative analysis, only few articles used standard event study methodology to investigate the value before and after share repurchase, finding that the market reaction to announcement of share repurchase is positive.There are few articles concentrating on the analysis of the influencing factors and the change of company's performance, so this article is on the basis of relevant research in the past, using standard event study methodology and the regression method to examine the motivation of share repurchases, the market reaction of share repurchase announcements and the influencing factors, the influence on company's performance and the relevant questions of"paying the debt by shares".The results of our study shows, (1) The signaling hypothesis, the financial lever hypothesis, the free cash flow hypothesis, the dividend substitution hypothesis and the wealth transfer hypothesis appeared in our county. And there are special motivations of share repurchases in our country, such as to cooperate with the share separation reform and to solve the big shareholder's occupied fund. Because of our country characterized governance structure, there exist two different object share repurchase—non-negotiable share repurchase and circulating share repurchase. Different share repurchase have different motivations. (2) The market reaction of share repurchase announcement is positive and the proportion of share repurchase, insider shareholding ratio, the biggest shareholder shareholding ratio can positively influence the market reaction, while the debt ratio and other factors negatively influence the market reaction. In addition, compare the financial data, we can find that the performance of the listed companies had not taken a favorable turn just after the announcement. (3) After share repurchase is really implemented, company's performance is improved notably. Debt ratio, the proportion of share repurchases, pb, and the relative index of governance has influence on the change of company performance. (4) There is a special type of share repurchase in our country called"paying the debt by shares". Comparing the company's performance before and after"paying the debt by shares", we find that there exists an improvement after the special type of share repurchase. In addition, this article pays attention to the question of expropriation of"paying the debt by shares". The higher the price, the problem of expropriation may become more serious. We need a clear understanding of the price of"paying the debt by shares". On the basis of net assets per share, the premium should guarantee the shareholder's right.