Research On The Motivation And Market Effect Of Share Repurchase

Share repurchase,as an important financial tool in the international capital market,was first used by Western countries such as Europe and the United States.Later,with the continuous development and maturity of China’s capital market,share repurchase has been paid more notice by some organization and people.However,when share repurchase is rapidly improved in China,the corresponding problems gradually arise,among which the most obvious problem is that listed companies implement share repurchase for their own opportunistic purposes.In order to prevent listed companies from transferring profits through share repurchase and further guide companies to carry out share repurchase in a more standardized manner,on January 11,2019,the Shanghai and Shenzhen Stock Exchanges promulgated the implementing rules for the share buyback by a listed company(hereinafter referred to as the "buyback rules").This paper firstly combs the share repurchase institutional development and scale in China,and then takes Haisco and Kelun Pharma as cases.In the aspect of motivation research,financial situation and action events are analyzed.In terms of financial condition,the case company is judged to have the ability to carry out share repurchase from its capital condition,solvency,operating condition and profitability.In terms of action events,major events before and after the company’s share repurchase announcement are analyzed to repurchase benefits.In the aspect of market effect research,it mainly studies the market effect generated after listed companies issue repurchase plan,so as to judge whether investors can effectively identify the motivation of share repurchase.At the same time,the effect of the termination and completion of the buyback plan is studied to analyze the results of share buyback.Through the study,this paper finds that Haisco,with its poor overall financial performance and zero buyback,has the opportunistic motivation to help major shareholders reduce their holdings and avoid the risk of equity pledge,while Kelun Pharma motivation to successfully implement buyback is the same as the announcement.The short-term market effect of the buyback plan of Haisco and Kelun Pharma have no difference,but the termination of Haisco buyback plan has a very negative market effect.Therefore,relevant departments should improve the regulation rules of share repurchase and increase the punishment;In view of the fact that small and medium investors cannot effectively identify the opportunistic motives of share repurchase,investors should improve their cognition and motivation recognition ability of share repurchase;Considering that the termination of share repurchase not only infringes the interests of minority shareholders but also damages the image of the company,the listed company should treat share repurchase rationally and issue repurchase plan cautiously.