Study On Motivation And Market Effect Of Share Repurchase Of Midea Group

Share repurchase,with the functions of improving corporate governance structure and optimizing capital structure,has gradually become a widely used capital operation tool in western mature capital markets since the 1970 s.With the development of securities market in our country and the completion of the reform of non-tradable shares,more and more listed companies began to share buybacks.Particularly in recent years,Chinese A-share market has been in a downturn.Share repurchase has become a frequently-used method for listed companies to save falling stock prices,and its number and scale have begun to grow explosively.Midea Group used 4 billion yuan of its own capital to conduct a public market buyback,which became the largest regular buyback completed that year.Like most repurchase companies,Midea Group stated in its repurchase announcement that the purpose of the repurchase was to boost the company's stock price and restore market confidence.However,the overall trend of the share price after the buyback is not ideal,which is because the share buyback is difficult to play a role in improving the share price in the Chinese market,or the buyback motivation is hidden and not simple,which is worth discussing and studying.This paper takes Midea Group's share buyback as a case study.Firstly,it summarizes the related concepts of share repurchase and the development process of share repurchase in China,and summarizes the theoretical basis of the repurchase motivation.Then,it introduces the case background and overall process of share repurchase of Midea Group.Then,starting from the motivation of stock price increase,DCF model is used to evaluate the company and verify the authenticity of the motivation of stock price increase.Coupled with our country market other mainstream repurchase motivations,through theoretical analysis,a variety of financial ratios,this paper explored other hidden motivators in this repurchase.Then,the event study method is used to test the effectiveness of buyback's effect on stock price promotion.Finally,the research conclusions of this paper are summarized and Suggestions on stakeholders and policies are put forward.The research conclusions are as follows: first,this paper takes share repurchase of Midea Group as the research object to conduct a case study.This case is the largest share repurchase case in a stock market in that year,but its market effect shows that share repurchase has a very limited effect on the improvement of stock price.Therefore,listed companies should not blindly regard buybacks as a "good medicine" for stock prices,and should be treated with caution and reasonable application.Second,the repurchase motivation of Midea group is not as simple as the announcement indicates.Its main motivations include raising the company's stock price,reducing agency costs and supplemental dividend policies,and even transferring wealth between shareholders.Therefore,some of listed companies hidden repurchase motivations in the share repurchase announcement.Such selective information disclosure will harm the interests of minority shareholders,and investors need to treat the repurchase behavior rationally.Third,information leakage and insider trading exist in the process of share repurchase.Relevant departments should learn from the experience of mature capital market,enhance the supervision and consummate laws and regulations.