Midea Group Share Repurchase Case Study

Share repurchases are an important tool commonly used by listed companies to stabilize share prices,improve capital structure and enhance value.In 2018,the Company Law was improved to allow listed companies to further expand the cap on the size of share repurchases and to make the process of implementing share repurchases simpler.After the Company Law removed some restrictions,listed companies began to reuse share repurchases,and a new wave of "buybacks" was ushered in by China’s capital markets.At present,the study of share repurchases in China is mainly a case study,but there are fewer case studies on the implementation of share repurchases in multiple consecutive periods.2018 to 2021,Midea Group conducted five share repurchases,with a total repurchase amount of 24 billion yuan,and Midea Group is known as "the largest repurchase company in the A-share market".The securities market and the company’s financial situation have responded accordingly,so the case of share repurchase of Midea Group is a representative case of share repurchase.This paper analyzes the five phases of share repurchases implemented by Midea Group from 2018 to 2021,and analyzes and evaluates each phase of the share repurchase program from the perspective of repurchase history,repurchase motives,and repurchase effects.In terms of motivation,it was analyzed that the motivation of each share repurchase period was different.In terms of repurchase effect,the repurchase effect was studied and summarized from three aspects: financial effect,market response,and R＆D and innovation capability.The study found that after the implementation of share repurchases by Midea,for the market effect,the excess cumulative return of each share repurchase was negative using the event study method,and the excess return was below2%,indicating that the short-term market effect was not obvious in each period.For the financial effect,the financial effect brought by each period was different,sometimes played a facilitating role,and sometimes did not.For the R＆D innovation ability,to judge the effect of the implementation of the equity incentive plan,the study found that the second period of equity incentive got an insignificant effect,and the third period of equity incentive had an obvious effect.In order to find out the factors affecting the insignificant effect of share repurchase market of Midea Group,all companies belonging to home appliance industry that declared and completed share repurchase from 2015 to 2021 were taken as samples,and 61 samples were collected for empirical analysis to reflect the share repurchase market effect with excess cumulative return as the explanatory variable.The results found that the significant factors affecting the share repurchase market effect are gearing ratio,repurchase ratio and return on net assets,and there is no significant relationship between repurchase purpose,P/E ratio and dividend ratio and share repurchase market effect.Based on the empirical results combined with the relevant theoretical basis,and in relation to the specific situation of Midea Group,it further specifies why the market effect of five share repurchases of Midea Group is not significant under the influence of these factors.In addition,the factors affecting the financial effect are also divided into macro and micro perspectives.Finally,on the basis of the empirical results,suggestions are given for its problems,and the whole paper is summarized with the shortcomings and the outlook for the future.