Empirical Research On Share Repurchase Of Chinese Listed Companies

This study mainly discusses the practice, legal system, motivation,market effect and influence factors of share repurchase in Chinese listedcompanies. Starting from the basic theory of stock repurchase and thecomparison between domestic and foreign practice and legal system, thisarticle puts forward hypothesis on the basis of literature review, and verifiesthe motivations of stock repurchase of listed companies in our country andthe factors that influenced announcement effect using multiple regressionanalysis. With the method of event study, it tests the market reaction to theannouncement. Finally, based on the empirical research conclusion, it comesup with the suggestions regarding policies and regulations and strengthenedsupervision for the development of share purchase in China. The conclusionsare summarized as below:Firstly, there are big differences of the repurchase motivations of listedcompanies in China and abroad. Some widely accepted hypothesis such assignaling, free cash flow and financial leverage have certain explanationstrength in China, while financial flexibility hypothesis so far can’t explainthe current practice. There are additional motivations existing in China inorder to optimize the equity structure and solve big shareholders’ occupiedcapital. Secondly, through empirical study, it finds that market reaction to theannouncement of share repurchase in China is positive and the informationhas been revealed ahead of the announcement date.Thirdly, the proportion of major shareholder, P/E ratio, company sizeand growth are the important factors which influenced market effect ofannouncement in China. Market effect positively related to the proportion ofthe major shareholder and growth rate, but negatively related to P/E ratio andcompany size. There is no pronounced association between cumulatedabnormal return of share price and asset-liability ratio and return on netassets.