The Research On Motivations Of Share Repurchase Declaration And Information Content Of Declaration Announcement

With the continuous improvement and development of the capital market,more and more listed companies begin to conduct market value management and employee equity incentive through share repurchase.However,as the ‘Company Law of the People’s Republic of China’(hereinafter referred to as the ‘Company Law’)has relatively strict requirements on share repurchase of listed companies,the number of companies carrying out share repurchase in the capital market is growing slowly.Until October 26,2018,at the sixth meeting of the Standing Committee of the 13 th National People’s Congress,the adoption of the amendment to the ‘Company Law’ caused widespread concern among the public and listed companies.Therefore,in 2018,the number of listed companies carrying out share repurchase in China increased in a blowout way.Share repurchase refers to the repurchase of the common shares issued by the company by the listed company according to a certain amount of capital obtained through surplus or loan.As an alternative to the cash dividend policy,the United States first began to buy back shares.Subsequently,scholars from other countries such as the Netherlands,South Korea,Japan,Greece,Singapore and Taiwan began to study them one after another.Since the 1980 s,foreign scholars have begun to use empirical research methods to study the repurchase motivation of listed companies and the market reaction caused by repurchase.Most of the understanding of repurchase motivation is limited to the theory of stock price undervaluation and free cash flow hypothesis,which has been proved repeatedly and approved by many scholars.For the study of market effect of share repurchase,scholars in different countries use different data in the capital market to test and find that share repurchase will cause the market to generate excess returns in the short term,and it is more likely to produce negative effects before the announcement date,and the market begins to show positive effects on the announcement date.In addition,some scholars divide the market effect of share repurchase into short-term and long-term respectively.The research results are different.Some scholars found that the market does not produce obvious effect in the short term,but in the long term,the market response is significantly positive.While some scholars found that there are more obvious effects in the short term and long term markets.In contrast,due to the late start of capital market in mainland China,and there are many unique problems in China,share repurchase is not popular in the last century.However,since 2006,with the reform of the split share structure and the ‘Issuance of the Measures for the Administration of the Public Share Repurchase of Listed Companies(Trial)’,the number of Listed Companies in China began to increase gradually.However,due to a small number of data samples,previous studies on share repurchase of listed companies in China have focused on normative studies and case studies,while the opportunity of the revision of the company law provides a relatively rich sample for this paper.This paper takes the listed companies in China’s A-share market in 2012-2018 as the research sample,studies the motivation of the announcement of share repurchase of listed companies.We combines the gradually popular equity pledge in the capital market and the financing mode of issuing convertible bonds in recent years,and adopts the research methods of binary logistic regression and multiple regression to study the relationship between the control transfer risk of controlling shareholders facing equity pledge,resale risk of convertible bonds and share repurchase.The results show that:(1)The listed companies with controlling shareholders’ equity pledge are more likely to announce share repurchase.(2)The higher the risk of control transfer,the more likely the listed companies are to announce share repurchase.(3)Listed companies with convertible corporate bonds are more likely to announce share repurchase.(4)The higher the risk of convertible bonds faced by listed companies,the more likely they are to announce share repurchase.Then taking the listed companies that announced share repurchase in China’s A-share market in 2012-2018 as the sample,this paper studies the information content of the disclosure type of repurchase announcement.First,through manual sorting,the repurchase funds disclosed in the announcement and the different situations of repurchase period(among them,the disclosure types of repurchase funds include two types: companies that disclose the upper and lower limits of funds at the same time and companies that only disclose the upper and lower limits of funds,the repurchase period varies from one month to 12 months),and then use the model to calculate the Average Abnormal Return(AAR)and Cumulative Abnormal Return(CAR)of the sample companies,using SPSS 22.0 to test the data grouping,we find that:(1)the listed companies that disclose the upper and lower limit of the total capital at the same time have greater market effect than the companies that only disclose the upper limit.(2)the shorter the implementation period of the announcement of the listed companies,the more significant the market effect.In view of the above research,this paper puts forward some suggestions.First,we need to improve the relevant provisions on the disclosure of share repurchase motives of listed companies.Second,refine the disclosure requirements of share repurchase announcement.Third,improve the information disclosure system of capital market.