Analysis On The Motivation And Effect Of GREE Electric Appliance’s Twice Stock Repurchase

The sudden outbreak of COVID-19 in 2020 broke the original development path and had a huge impact on the company’s operation.The stock market once again entered a downward trend.GREE Electric Appliances is one of many companies that have embarked on share buybacks in an effort to maintain a reasonable valuation of their share prices and avoid a fall.This is the first time GREE Electric Appliances has taken stock repurchase measures.What is more noteworthy is that before the first phase of stock repurchase has been fully completed,GREE Electric Appliances has released the second phase of stock repurchase announcement.Taking GREE Electric Appliances as an example,this paper analyzes the contents of the two stock repurchases,and studies the motivation and influence of the company in different stages and development environments.Firstly,the literature of stock repurchase is reviewed to understand the theoretical basis of stock repurchase.Secondly,it is crucial to analyze the contents of GREE Electric Appliance’s two stock repurchases in depth,so as to explore the motivation of stock repurchase and analyze the impact of the implementation of share buybacks.The last part is to summarize the key points of the case,sort out some problems existing in the process of stock repurchase,and put forward relevant suggestions,in order to provide some references for the company to implement stock repurchase in the future.A comparative analysis of GREE Electric Appliance’s two periods of share buyback research shows that share buyback has a positive effect.Is conducive to the transmission of positive information,and then raise the stock price.Still beneficial to improve fund utilization rate,reduce agency cost.Meanwhile,these effects will increase with the increase of share repurchase times.However,the implementation of stock buyback also has negative effects or the effects are not positive.In terms of financial effect,share repurchase has little stimulating effect on the growth ability and operating ability of enterprises,and cannot fundamentally improve the operating status of enterprises.It may also make shareholders doubt the company’s operating conditions,affect the ownership structure of the company,and easily infringe the interests of minority shareholders and send negative signals.So while share buybacks are effective,they are not suitable for every company.The enterprise needs to decide whether to carry out share repurchase based on its own specific situation and formulate its own unique share repurchase plan in line with the company’s current development situation.