Short-term Market Effect Of Open Repurchase By Chinese Enterprises

Stock repurchase refers to the behavior of a listed company using the surplus income to accumulate and buy back a certain amount of common stock issued by the company.Stock repurchase has long been an effective tool for adjusting capital structure and managing market value in mature capital markets in Europe and America,but it is not widely used in domestic capital market due to relevant policy restrictions.In recent years,with the development of the domestic repurchase system,the domestic capital market has increasingly attached importance to the tool of stock repurchase,and the application frequency of stock repurchase as a tool to adjust the capital structure has been greatly increased.Based on the macroscopic background,this paper use event study method and multivariate statistics,on January 1,2018 to May 30,2021,the Shanghai and Shenzhen A stock market during the implementation of open market repurchase of listed companies as samples,the classification based on life cycle theory,using cash flow classification to the listed company is divided into three life cycle,growth,maturity and decline At the same time,the size of short-term market effect caused by buyback event is estimated by event study method.Then using the statistical methods of t test,median test and multiple linear regression,we explore the influence of enterprise life cycle on the short-term market effect of open market repurchase.Finally,on the basis of distinguishing the life cycle of enterprises,the difference of short-term market effect between the samples with equity incentive and the samples with non-equity incentive is explored.The final conclusions of this paper are as follows:(1)the group test results show that the short-term market effect of open market repurchase of growing enterprises is significantly lower than that of mature and declining enterprises,while there is no difference between mature and declining enterprises,indicating that the market believes that under the condition of possible financing constraints,share repurchase of growing enterprises can not have a positive impact on their future operating performance,Therefore,its announcement effect is low.In addition,it is also found that in addition to the growth samples,the samples with equity incentive in the purpose of repurchase have higher short-term market effect than the samples without equity incentive;(2)The multiple regression results verify that the announcement effect of growing enterprises is significantly low,and the short-term market effect of the sample containing equity incentive in the purpose of repurchase is significantly high.In addition,it is also found that the proportion of proposed repurchase will also have an impact on the announcement effect.The higher the proportion of proposed repurchase,the higher the short-term market effect;(3)The regression in different life cycle stages shows that the factors affecting the repurchase announcement effect are different in different enterprise life cycle stages.The main conclusion is that for growing enterprises,the announced short-term market effect has nothing to do with the purpose of repurchase.In the whole life cycle,the announced short-term market effect is positively correlated with the proportion of proposed repurchase.Based on the perspective of life cycle,this paper provides a new explanation for the short-term market effect of open market repurchase.