A Study On The Ability And Influencing Factors Of Stock Repurchase Of Listed Companies

In 2015, our stock market has experienced a stunning change from the beginning of a bull market, the formation of a bull market to a drastic stock market crash. In order to stabilize the stock market, our government has issued series of policies. On July 8th 2015, China Securities Regulatory Commission released Notice on increasing shareholding among the major shareholders, directors, supervisors, senior managers, hereinafter referred as The Notice. The release of The Notice has been the start of stock repurchase spree in the stock market.Stock repurchase refers to the act of buying back the outstanding stock shares out of some reasons under the circumstances of obeying to the regulations. Either all these repurchased stock will be reserved as Treasury Stock or be cancelled. In our country, because of the slow development of the stock repurchase market, the managers haven’t realized the important role stock repurchase played, so as one of the important financial policies stock repurchase hasn’t been used very commonly. Also, at the same time, the reason why firms execute stock repurchase in China is mostly because of the failure of the stock ownership incentive, companies decide to repurchase their stocks when the incentive conditions are not satisfied for the managers, not because of the price underestimation.The researches relating to stock repurchase in China are mainly focused on the purpose of the repurchase and the marketing effects of the stock repurchase. People seldom relate the stock repurchase to market timing theory. So this paper try to conduct the research based on the timing theory, we try to use market timing theory to explain the execution of the stock repurchase. This paper contains three main parts, the first part mainly talks about whether market timing theory exists in stock repurchase market, and the second part does the research based on the result of the first part. If market timing exists in stock repurchase market, then in this part, we will try to find the factors that affect the market timing ability, including the factors for the right timing in stock repurchase and the false timing in stock repurchase, the last part is the conclusion of this thesis.In this paper, in order to tell whether market timing exists or not in the stock repurchase market, we then compared the average price of repurchased stock with the market average price, and the result shows that most of the listed companies in China have the ability to choose the right time to execute stock repurchase. And then we used the sample of being able to choose the right time in stock repurchase to find the factors that affects the timing abilities in stock repurchase by using Multiple Linear Regression method, and the regression result indicates that the factors affecting the timing abilities are mainly market average abnormal return, pre and after repurchase accumulated abnormal return, the length of repurchase period, the repurchase portion and other notices released during repurchase period, and the managerial flexibility didn’t affect the timing ability. At the end, we saw that stock repurchase performance is different by adding a dummy variable of whether it is listed on shanghai stock exchange, and also we did the analysis based on the sample of wrongly time-chosen. And the result shows that the main factor that caused the timing ability difference for companies listed in different stock exchange is the length of repurchase period. And for those wrongly time chosen companies, the reason of the wrongly time chosen is because of the managerial flexibility, thus we conclude that for the wrongly time chosen companies, the reason is because of that the managers didn’t make use of the information of the market, not because they chose the wrong repurchase time purposely.