Research On Corporate Stock Repurchase Behavior Based On Financial Flexibility Perspective

Stock repurchase is an important way for listed companies to carry out capital activities in the capital market.Stock repurchase is an important dividend distribution policy of a company and also an important means to optimize the internal capital structure and improve corporate governance.Not only can it bring some influences to the market participants,but also bring the financial effect to the enterprises that make the repurchase activities themselves.Although the stock repurchase in China started relatively later than the western countries.With the improvement of the market system and the sound laws and regulations,the repurchase of stocks by the enterprises is increasing day by day.The company’s purpose of stock repurchase is mainly based on several aspects: raise the stock price;enhance market confidence;reduce agency costs.The research on the repurchase market in the capital market mainly probes into whether the economic results after the repurchase and the repurchase should exert a far-reaching impact on the stock market.However,there is less research on the motivation and economic effect of the internal financial flexibility of the repurchase for the company.Therefore,it is of theoretical and practical significance to analyze the motivation of corporate stock repurchase and the effect after repurchase under different financial flexibility in China.This paper selects all the repurchase activities of Evergrande Group from 2011 as the research object and analyzes the motivation and economic effect of Evergrande Group stock repurchase with lower financial flexibility.Evergrande Group has a number of repurchase activities in 2011 to 2016,and the repurchase amount is huge,which is rare in the securities market.It is worth mentioning that Evergrande Group in the repurchase activities at the same time the company’s asset-liability ratio more than 92%.The conduct of repurchase activities has more increased the risk of the company business.Therefore,it is of great theoretical and practical value to study the cases of repurchase by Evergrande Group under the conditions of high debt,to find internal strategic motivation and the financial effect brought by the corporate repurchase.According to the analysis,the paper draws the following conclusions: In the low financial flexibility of repurchase enterprises,the signal transmission hypothesis is more reasonable to explain the motivation of repurchase;In highly financial flexibility of repurchase enterprises,the sign hypothesis and the financial leverage hypothesis explain the motivation of repurchase m Rore reasonable.This shows that the repurchase activities in China did not play any other role,but out of simple motivation.The repurchase by Evergrande Group was also mainly due to the delivery of corporate signals in preparation for its return to the A-share market.However,the higher debt ratio brought by the repurchase was negligible before the better operating potential.Evergrande Group repurchase activity does play a role in boosting stock prices in the short term,but in the long run does not make the company’s financial position significantly improved.