Research On The Reasons And Economic Consequences Of Share Repurchase Of Gree Electric Appliance

Share repurchase refers to the behavior of listed companies using their own funds or borrowing to repurchase the outstanding shares.In the context of the vigorous development of China’s capital market,the relevant system of share repurchase is also being improved.At present,listed companies usually use share repurchases to transmit signals of undervalued value to the outside world,improve capital structure and other purposes.However,due to the widespread principal-agent problem in modern enterprises,major shareholders or management may use information asymmetry to seek benefits for themselves through share repurchases.Such behavior will not only harm the interests of small and medium-sized shareholders and creditors,but also bring adverse effects on the capital market.Therefore,it is of great practical value to strengthen the research of share repurchase.Through combing the literature,it is found that scholars’ research on share repurchase has been very rich,but there are still the following development directions.First,at present,scholars focus on verifying the drivers of signal transmission,free cash flow and equity incentives,while there is less research on the opportunistic drivers under the principal-agent problem.The people who implement opportunism often have greater power in the company and have a greater impact on share repurchase.Second,in the current research on the economic consequences of share repurchase,scholars have not reached a unified view and conclusion.Therefore,selecting typical case companies to study can be more convincing and provide some reference for other listed companies.Therefore,based on the previous studies,this paper further studies the motives and economic consequences of repurchase.To be specific,this paper first combs the development process of share repurchase in China,analyzes and summarizes the existing characteristics from the number of plans,repurchase purposes and other aspects;Secondly,on the basis of previous studies,combining the signal transmission theory,principal-agent theory and information asymmetry theory,we build a motivation analysis framework to analyze and verify the potential motivation of the case company from multiple perspectives,so as to identify the real motivation of its implementation of share repurchase;Thirdly,the event study method and financial index method are used to analyze the economic consequences;Finally,draw conclusions and put forward suggestions.The conclusions of this paper are as follows: First,there are multiple motivations in share repurchase.This paper verifies the potential motivation through the established motivation analysis framework,and concludes that listed companies can increase the share price through share repurchase,thus alleviating the risk of major shareholders’ share pledge;Transferring the repurchased shares to the management in disguised form through the employee stock ownership plan;Use share repurchases to provide stock price support for major shareholders to reduce their holdings and gain profits;Second,it is difficult for small and medium-sized investors to identify the real motivation of share repurchase in the short term.This paper finds that most share repurchases have positive short-term market effects,which indicates that some small and medium-sized investors in China’s capital market can not effectively identify the real motives of repurchases in the short term and invest accordingly.Third,opportunistic share repurchase will bring negative economic consequences.The reason is that the market will eventually identify the potential opportunistic motives in the share repurchase,and the opportunistic implementers will infringe the rights and interests of the company and small and mediumsized shareholders in order to seek benefits,which will make the company’s financial ability significantly weakened,specifically reflected in the decline of stock prices and the deterioration of financial situation.The contributions of this paper are as follows: First,this paper sets up an analytical framework for the motivation of share repurchase.The framework of motivation analysis based on signal transmission perspective,principal-agent perspective and other motivation perspectives can help small and medium-sized investors effectively identify the real motivation of share repurchase of listed companies.Second,this paper expands the relevant research on the motivation of opportunistic behavior of share repurchase.Based on the characteristics of China’s emerging capital market,this paper verifies the opportunistic behavior motivation of share repurchase to reduce the risk of closing positions in the case of large shareholders’ share pledge,and enriches the relevant research of share repurchase motivation.The third is to supplement the research on share repurchase in China’s capital market in the context of the new system.