Analysis On The Motivation And Effect Of Zoomlion Stock Buyback

On October 14,2022,the revision of the Share repurchase Rules for Listed companies once again drew the attention of investors to the company’s share repurchase market.Stock repurchase is an important tool,which can be used to maintain the investment value of the company,improve the corporate governance structure and expand investors’ returns.It is also an important institutional mechanism in the capital market.With the development of our capital market,the scale of stock buyback and the number of enterprises participating in buyback have grown significantly in recent years.Zoomlion is a representative enterprise in China’s construction machinery industry.In the recent five years,Zoomlion has conducted two stock repurchases in 2019 and 2022 respectively.The motivation and effect of the two stock repurchases remain to be studied.The research of this paper can add a representative case to the stock repurchase case base,and also provide inspiration and reference for listed companies,investors and regulatory authorities.This paper takes Zoomlion Group’s two recent stock buybacks as the research object,aiming to analyze the motivation and effect of corporate stock buybacks.Firstly,by combing relevant literature at home and abroad,we can master the current theory and research status of the motivation and effect of stock repurchase.Secondly,it introduces the basic situation of Zoomlion and the process of stock buyback,and prepares for the following analysis of motivation and effect.The motivation of stock buyback is mainly analyzed from four aspects.Through the analysis of the motivation of Zoomlion’s stock buyback,it is found that the motivation of Zoomlion’s two stock buybacks is not exactly the same.In addition to the equity incentive motivation clearly pointed out in the two buyback announcements,the first stock buyback also has the motivation of reducing free cash flow.The second stock repurchase also has the motivation to increase stock price and reduce cash flow,while the two stock repurchases have no motivation to optimize capital structure.The effect of stock repurchase is mainly analyzed from two directions: market effect and financial effect.Through the analysis of the effect of Zoomlion’s share buyback,it is found that in the short term,share buyback will lead to the increase of stock price,the improvement of profitability,operation ability and growth ability,and the decline of debt paying ability,but the long-term effect is not obvious.Finally,according to the conclusion of this paper,some suggestions are put forward for enterprises,regulators and investors.The conclusions and suggestions of this paper can provide reference for the management of listed companies when making stock repurchase decisions,help investors rationally understand the motivation and effect of stock repurchase,provide more valuable regulatory information for the regulatory authorities,and create a good capital market environment.