Repurchase Financial Analysis And Decision

This thesis studies the theory of stock repurchase and practice of Chinese listed companies. On the whole, it can be divided into four chapters. Firstly, the author discusses the fundamental theory and financial operational mechanism of stock repurchase. On this basis, the author compares the practical operation of stock repurchase between the Western countries and China. Furthermore, the author designs a static financial analytic model in order to conduct a deeper research on the process and effect of stock repurchase in China. Lastly, the author puts forward her general arrangement for stock repurchase in China, hoping it would be helpful to the practice of Chinese listed companies and to the constitution of related policies and the supervision of relevant administrations.CHAPTER ONE: Theory and Financial Operation Mechanism of Stock Repurchase After reviewing the development of stock repurchase, the first section describes its basic methods, fundamental mathematics model and main effects. At present, there are five methods of stock repurchase: public market method, negotiation repurchase, exchange of offers, cash offer, transferable right of sale. In Western countries, Vermaelen has set up the fundamental analytic mathematics model, drawing the conclusion that the wealth effect caused by stock repurchase should be distributed between the stockholders who accept the repurchase offer and those who refuse it. Moreover, it has been tested that the latter would obtain the bigger part of the increment of wealth, on the whole. And the author sums up the effects of stock repurchase, with the conclusion that the main function of it exhibits in five aspects: anti-purchase, management decision, employee stock ownership and inspiring mechanism in companies, price stabilizing and value forming. In the second section, the author carries out a research into the financial operational mechanism of stock repurchase, following such analytic ways: Judgement before repurchase decision Process of decision Effect after decision. Before a repurchase, generally speaking, the decision is influenced by the factors hereinafter: the stability and durability of cash flow, the taxation preference of stockholders, the potential investment demand and the reflection of investors. In the process of decision, several considerations would influence administers of the company: time selecting, price fixing, source of fund, and ways of payment. With its considerable advantages such as less pressure of cash flow, higher flexibility and better direction of payment, stock repurchase has become more and more popular recently and has played an important role in the modern capital operation.CHAPTER TWO: The Comparative Research on the Difference of Stock Repurchase between the Western Countries and China From this chapter on, the author turns the research into the practice in China. Looking back on the development of stock repurchase in China, she gives a thorough analysis by YUN TIAN HUA repurchase case. She finds that the main difference between the Western countries and China lies in two aspects: one is the difference of economic and juristic environment; the other is the difference of financial operation mechanism. In view of the existent situation, the operation of stock repurchase in China shows its characteristic in six aspects as follows: repurchase purpose, repurchase object, price fixing, source of fund, financial management and repurchase methods.CHAPTER THREE: The Static Financial Analysis of Stock Repurchase in ChinaIn this chapter, the author designs a static financial analytic model aiming to reveal the essence of stock repurchase in China. By comparing the common dispense payment with repurchase only for state-owned equity, the author discloses the characteristic of the operational mechanism of Chinese repurchase. Following such analytic process as the change of equity of both parties the change of overall wealth of both partiespricing analysis financial index analysis, the auth...