A Reasearch On The Motivation And Market Effect Of Shenergy Share Repurchase

Stock repurchase is the use of surplus earnings of listed companies to accumulate funds or debt financing at a certain price and according to a certain proportion of the company itself has been issued to repurchase the common stock,the common stock will be purchased as the Treasury shares or write-off to achieve Capital reduction or capital structure adjustment purposes.It originated in the developed western capitalist countries and rose in the 1980 s.Stock repurchase is regarded as an important tool for corporate capital operation.China's stock repurchase market develop in a relatively shorter period.The occurrence of stock repurchase is rarely happen in China before 2005 due to the particularity of China's social structure and market nature,as well as the legal restrictions on listed companies' stock repurchase activities.The development of China's stock repurchase start when small yu garden merged with large yu garden in 1992.Since then,listing companies such as Lujiazui and Yuntianhua have also implemented stock repurchases.As the joint stock companies in China in the early years normally have a large proportion of state-owned shares.The rapid innovation of stock repurchase help solve the problem of “predominant of one shareholder”,which to a certain extent improved the ownership structure of listed companies in China.After the introduction of “The listed company repurchase measures for the management of social public offerings(trail)” in 2005,China's stock repurchase market is gradually becoming more mature.Stock repurchase not only help adjust the ownership structure that improve the efficiency of capital operation in listed companies,but also positively promote the development of socialist economy with Chinese characteristics.This paper use the event of stock repurchase in Shenergy as the research object,the repurchase motive and the market effect are explored by using event study and case analysis as methodologies.The result suggests the signaling effect of stock repurchase when listing companies attempt to deliver positive information to the market.In the meantime,market also respond actively to the event.This paper is divided into five chapters,the first chapter introduces the research background,the contribution,the research methods and literature review.Based on vast of literature on this topic,the second chapter introduces the theory of stock repurchase,and the development process of stock repurchase in China.Chapter two also describes every individual stage of stock repurchase briefly,and then introduces the regulation and requirement of stock repurchase in China.The methods of descriptive statistics are used to summarize and analyze the object,motication and source of stock repurchase in China.The third chapter discusses the basic situation of Shenergy shares.The fourth chapter is a detailed analysis of the motivation and market effect of Shenergy share repurchase.The event study method is used to test the abnormal return(AR)and the cumulative daily return rate(CAR)before and after the announcement to examine whether there is a significant and positive market impact of stock repurchase.Finally,the fifth chapter is the conclusion and suggestion summarized from the analysis in this paper.