Research On The Motivation And Effect Of Midea Group’s Continuous Stock Repurchase

Stock repurchase refers to the behavior of a listed company using its own funds,external loans or other sources of funds to buy back its issued specific number of shares from the capital market in accordance with the prescribed procedures and methods.Stock repurchase system originated from western countries and has been developed for more than 50 years.The development history of stock repurchase in China is relatively short.In recent years,with the continuous development of China’s capital market,the number of listed companies using stock repurchase to realize capital operation and market value management is increasing year by year.To study the motivation and effect of stock repurchase is of great significance to further enrich the existing research on stock repurchase and guide Chinese listed companies to carry out stock repurchase.From 2018 to 2020,Midea Group carried out stock repurchase plans with a total repurchase amount of nearly 10 billion yuan for three consecutive years,and its repurchase is highly representative.Therefore,based on the continuous stock repurchase Midea Group as the research object,from the relevant theories of repurchase,using the case method,event study method and financial performance evaluation and other methods of Midea Group produced by continuous stock repurchase motivations,repurchase market effect and financial effect for analysis,and according to the effect of repurchase after,Further verify whether the analysis of the buyback motivation in this paper is reasonable and effective.This paper draws the following conclusions: As for the motivation of buyback,this paper finds that maintaining a reasonable valuation of stock price and cooperating with the company’s equity incentive plan are indeed the main motivation for Midea Group to carry out continuous share buyback.In addition,Midea Group carries out continuous share repurchase to improve the efficiency of capital use and avoid the risk of equity pledge liquidation.As for the buyback effect,this paper finds that in terms of stock price changes,the continuous share buyback of Midea Group has a very limited effect on the increase of stock price.The share buyback only has a slight effect on the increase of stock price in a few trading days after the announcement,and this effect does not last for the whole buyback period.In terms of market effect,after Midea Group issued successive share repurchase announcements,there was a positive effect in the market in the short term.However,in the long term,as the enterprise fundamentals did not improve,as market investors gradually returned to rationality,the positive effect gradually decreased and even reversed.In terms of financial effect,the financial indicators of Midea Group have not been significantly improved due to the implementation of the continuous share repurchase plan.Based on the above research,this paper puts forward some research suggestions,hoping to help the implementation of stock repurchase.