The Comparative Study Of Share Repurchase By The Public Companies Between China And The United States

Share repurchase, as one of the significant patterns for deflating capital operation, has been holding a strategic post in the development of modern enterprises and capital market, and extremely helpful to the financial leverage optimization, the operating risk reduction, the price discovery and the market transparency in the listed companies. In1950s, with the United States issuing relevant laws and regulations for the cancellation of share repurchase restrictions, some large-scale listed companies started trying the capital operation, whose history has been more than60years. Share repurchase broke the ice in China relatively late, and developed itself based on the issues left over by history such as the split-share reform, so the capital operation for share repurchase are not mature. Through comparative studies between the share repurchase in China and in the United States, this article aims to learn the successful experience from American capital market, and to enhance deficiencies in the share repurchase development in China so as to promote further perfecting the capital market.This article carries on the comparative studies from five aspects, which respectively is repurchase methods, repurchase motivations, market effect and influencing factors, financial effect, and earnings management. The way of share repurchase in China, by contrast, is relatively single, with a higher priority to private negotiated repurchase. Repurchase motivations are mostly relevant to split-share reform, state-owned shares lessening and other special reasons. The short-term share repurchase is beneficial to the increase of listed company’s share prices, but its long-term market effect is not significant and may lead to the leakage of information. Earnings management activities are so widespread in share repurchase that the market investors cannot effectively distinguish which one is true. In addition, this article innovatively employs Tobin Q method, combining with the control variables like enterprise scale, financial leverage, and profitability, to testify the influence of earnings management activities on enterprise values. This has great significance for the studies on share repurchase in China. Finally, based on the deficiencies in share repurchase of the listed companies in China, this article will offer valuable suggestions from the aspects such as laws and regulations, mechanism of information disclosure, and share repurchase intension, etc. Hopefully, it will make a theoretical and practical significance for the development of share repurchase in China.