Research On The Economic Effects Of Share Repurchases For Listed Companies In China

Share repurchase, as a crucial way for capital withdrawl and redistribution of values, is gaining increasing attention of corperate managers, investors, goveronment controlors and other stakeholders. In order to comprehensively analyze three economic effects, including market effect (both short-term and long-term), financial effect, and signaling effect, of share repurchase on public companies, this dissertation gives an empirical study to verify the changes of stock price and financial indicators after share repurchase, simultaneously analyze the information which companies want to deliver to inventors, based on the theory of asymmetric information and efficient market hypothesis. Our data come from the sample of listed companies in China which have announced open market share repurchase in year2005to2013.The results show that,1) share repurchase has significant short-term market effects, which gives a cumulative abnormal return up to about4.51%(window [-4,4]), but no significant long-term effect on positive abnormal returns, this kind of temporary positive reaction cannot last for a particular length of time,2) share repurchase might mean decreased investment opportunities but not fluctuate operating performance in the subsequent three years,3) free cash flow hypothesis should be supported, that is, share repurchase demonstrates steady financial environment of the enterprise, which means more free cash for dividends and a low chance of overinvestment. We also designed a regression analysis on short-term market effects and financial performance changes, found that firms with high cash level but lack of investment opportunities have more severe market reaction, further verified the prediction effect of free cash flow hypothesis.This dissertation is the most comprehensive one on the economic effects of share repurchase at present. It not only support stakeholders with empirical data to fully understand, predict and regulate the behavior of share repurchase, but also provide a theoretical reference for buyback market regulations and construction of laws.