Research On The Causes And Financial Effects Of Stock Repurchases

Since the 1960s,Western developed countries represented by the United States have begun to pay attention to the "new things" of stock repurchases.With the improvement of relevant laws and regulations in the 1980s and the continuous research of stock repurchases by Western scholars,stock repurchases have become one of the most common and most recognized financial instruments in the US and Europe.It refers to the behavior of listed companies repaying companies’ stocks in the secondary market to the company and canceling or storing them in a paid manner according to the law.The stock repurchasing can adjust the capital structure of the company,and externally boost the stock price of the company.Internal equity can protect the equity of the company’s shareholders,and it can also help the listed company to enhance its own profitability and future development potential.Compared to the development history of western stock repurchases,domestic stock repurchases began to appear in the 1990s,less than 30 years ago,and in the initial stage of more than a decade,the Chinese government has many restrictions on repurchase behavior..With the gradual improvement of the capital market,relevant departments gradually liberalized the restrictions on some stock repurchasing activities.In the period of reform of shareholding structure in 2005,a large number of companies implemented stock repurchases and achieved remarkable results,promoting the domestic securities market from the side.The further improvement of development.However,it is undeniable that there were few examples of domestic stock repurchases before the financial crisis in 2008,especially the case of repurchasing repurchases of circulating shares through the secondary market.Due to the particularity of the domestic market,the relevant hypotheses or theories about the repurchase of Western advanced economies are not completely applicable to the case analysis of China’s early stock repurchases.Therefore,the research on early stock repurchases by Chinese experts is more based on Western research results.Explore the theory of repurchase that suits the country.At present,the domestic securities market is gradually improving,more and more repurchase cases have occurred,and the number of scholars investigating stock repurchases has also begun to increase.However,due to the lack of experience in case studies,research results tend to be one-sided in guiding China’s listed companies to conduct stock repurchases..Therefore,this article uses a combination of literature research,theoretical induction,and case study methods to analyze and discuss the case of Xugong Machinery’s stock repurchases.This paper focuses on the motivation and financial effects of Xugong Machinery’s stock repurchases.Vertically compare the changes in the financial status and cash flow of Xugong Machinery before and after the stock repurchase that has been dragged down by the industry since 201 1,and use the event research method to calculate the excess return rate of Xugong Machinery’s stock repurchase in the window period around the declaration date.To analyze the impact of stock repurchases on the wealth of short-term shareholders.By sorting out the domestic and foreign literature and theoretical basis,combining with the related theories hypothesis of wealth transfer hypothesis,financial flexibility hypothesis,signal transmission theory,free cash flow hypothesis,and other related theoretical hypotheses,in-depth analysis of the main reasons for Xugong Machinery’s stock repurchase and announcement of repurchase Short-term feedback from capital markets and investors.By analyzing the repurchase process of Xugong Machinery,signaling that stock prices are undervalued,companies owning a large amount of their own funds,and changing dividend policies,the pursuit of financial flexibility is the main motivation for Xugong Machinery’s implementation of stock repurchases;and the above repurchase drivers are being After the gloomy environment of the depressed market environment and sluggish industry,Xugong Machinery’s management personnel were urged to implement the stock repurchase method and improve the company’s financial indicators such as operations,debt repayment and profitability.Judging from the short-term market reaction,Xugong Machinery obtained positive feedback from the capital market and small and medium investors after the implementation of the share repurchase,resulting in an increase in shareholder wealth in the short term,but due to Xugong Machinery’s failure to initiate stock repurchases for a long time after its announcement,The positive market effect caused by stock repurchases did not continue.The case of Xugong Machinery’s stock repurchase can provide some enlightenment from the following three aspects:First,the premise of the implementation of stock repurchases by listed companies is that the company itself has indeed the potential for development and business performance higher than industry standards,and can recognize The implementation of stock repurchase will have a series of impacts on the company,and it will not blindly implement stock repurchases.Second,small and medium investors in the capital market need to learn about the relevant laws and regulations concerning stock repurchase.Real-time attention should be paid to companies that announce stock repurchase.Whether the company has a good profitability,growth capacity,and whether there is information leakage risk of stock repurchases,cannot blindly believe that stock repurchases will bring positive effects to prevent damage to their own interests;Third,the regulatory authorities should further improve The relevant system of domestic stock repurchases regulates and supervises the repurchase behaviors of listed company companies throughout the process,providing a more favorable market environment for companies to implement stock repurchases.