Research On The Motivation And Financial Effect Of Share Repurchase Of M Company

Share repurchase originated in western capital markets and is generally used to stabilize and boost stock prices.In 1990 s,China started the earliest share repurchase in order to solve the problem of share separation,and there were many restrictions on repurchase at that time.With the improvement and development of China’s capital market,the restrictions on share repurchase have been gradually released,more implementation rules have been promulgated,detailed guidelines have been made on the implementation of repurchase,and the enthusiasm of listed companies to repurchase has been stimulated.After the introduction of the special amendment to the Company Law in 2018,the source and use of buyback funds were expanded,making the implementation of buyback more convenient and easy to operate,which triggered the buyback boom,a substantial increase in the number of companies repurchasing,and the buyback funds repeatedly reached new highs.M Company has been repurchasing shares for many years,and actively uses share repurchase as a capital means to maintain the company’s market value.In particular,the two large repurchases totaling 13.6 billion yuan in 2021 have attracted the attention of the capital market.Therefore,this paper studies the two repurchases of M Company.First of all,this paper summarizes the domestic and foreign academic research status of share buyback,including buyback motivation and buyback effect.Secondly,this paper summarizes the concept and theoretical basis of share repurchase,introduces the operation and financial situation of M company,as well as the background and program of repurchase.Then it analyzes the motivation of buyback in detail,including equity incentive,improving the efficiency of capital use and stabilizing stock price.Thirdly,this paper focuses on analyzing the financial effect of buyback,including financial performance,capital structure,fund use efficiency and principal-agent cost.Secondly,it analyzes the relevant implementation of the equity incentive plan.After comparing the changes of M Company’s stock price and Shenzhen Stock index before and after buyback,it believes that buyback has reduced the decline of stock price to some extent.The abnormal rate of return is calculated by using the event study method.Through the analysis of M Company’s share repurchase cases,this paper draws the following conclusions: First,the motivation of share repurchase is to implement equity incentive,stabilize stock price and improve the efficiency of fund use;Second,share repurchase can improve the financial ability of enterprises and produce good financial effect;Third,share repurchase can bring positive market reaction,but the effect is limited and the duration is short.On this basis,this paper draws several enlightenments: First,listed companies should choose the right time to implement share repurchase;Second,actively promote the buyback for the purpose of equity incentive;Third,listed companies should buy back in time and in full to ensure efficiency and fairness.To sum up,this paper,through the combination of theory and case,makes a more in-depth and targeted study on share repurchase,a capital market operation tool,hoping to provide some reference for listed companies in China to implement share repurchase.