The Empirical Research On Stock Repurchase In Chinese Listed Companies On The Basis Of Signaling Theory

This paper used the theory of Signaling (Spencer 1973) in Information Economics to the research on the action of stock repurchase (Chapter II). Firstly, Based on the theory of signaling and grouped according to long and short-term signal effect, this paper reviewed the related research of stock repurchase in the United States, Canada, Australia, Germany, France, Norway, Japan, South Korea, India and Thailand (Chapter III). Secondly, Using event_study methodology, this paper analized empirically the market effect of stock repurchase announced on the Mainland (Shanghai and Shenzhen),Hong Kong and NASDAQ stock markets from the period between 1994 to 2007, and found differences in signaling strength and reaction pattern between the three stock markets. N-shares got the highest average abnormal returns (3.05%) on the announcement day; Information was leaked to the market before repurchase was announced on A-share market and under-reation existed in A-share market, as well as N-share market is most effective among the three markets. This may be due to the different effectiveness between the three stock markets and different regulations formulated in the three areas (Chapter V). In addition, This paper subdivided the A-share market according to industry and repurchase purpose and found: 1) Firms that belong to one-third of the industries had positive average abnormal returns (ARs) on the announcement day, and firms that belong to agriculture industry got the highest ARs(3.7%); 2) Firms that had different motivitions all got positive ARs, and firms that stated reduction of state-owned shares as their main repurchasing motivition got the highest ARs(2.38%); 3) A-share market investors reacted rationally to stock repurchase announcements.