The Positive Research On Share Repurchase Under Undervaluation Motivation In Chinese Listed Companies Based On Signaling Theory

Share repurchases originated from USA have been widely for over 50 years. It is an alternative form of dividend payout policy and capital operation for the listed companies in western countries. Comparing to the western countries, the first share repurchase case occurred in 1992. But the voluntary repurchase which is similar to the western repurchase actually happened after 2008 when the relevant laws and regulations begin to apply. Therefore, it is significant to figure out motivation and effect of share repurchase under new stage after 2008 to perfect the laws and regulations. But most of the previous studies ignored the specific environment and features and the majority of them are quite similar.This study aims at the repurchases of the latest stage, the period after the additional regulations are issued in 2008, after the meticulous division and study of the relevant history. On one hand, this paper examined the authenticity of motivation and market reaction with relative evaluating method and event study method. On the other hand, this study organized the inner logic, proposed the concept of signal intensity and analyzed the correlativity among repurchase motivation, market reaction and signal intensity based on the signaling theory. The empirical study found that:First, on the motivation of repurchases for listed companies with announcement of undervaluation after 2008, the paper verified the authenticity of the signaling hypothesis.Secondly, based on the signaling theory, the paper proposed the concept of signal intensity which could be measured by three variables (repurchase period, repurchase premium rate and repurchase rate) and found that the signal intensity and the undervaluation extent represent positive correlation obviously.Thirdly, the paper found the announcement of share repurchase has certain market reaction in our listed companies with event study method and also found that the announcement information has been revealed ahead of time. But the degree of that is lower than the previous studies which means the capital market efficiency has been promoted since then and the inside information has been restricted in a certain extent.The paper also proved the positive correlation between signal intensity and market reaction basically using the variables of repurchase period and repurchase premium rate. The reason why repurchase rate cannot be verified may be because of the restriction of capital sources.