Research On The Stock Repurchase Behavior And Effect Of W Enterprise Under The Background Of Equity Pledge

Due to the advantages of simple process,less financing conditions,fast financing,and unchanged control rights,more and more major shareholders of listed companies choose equity pledge to raise funds.However,equity pledge also has its disadvantages.Once the financial market fluctuates greatly due to macro factors or the company falls into a negative crisis,the company’s stock price will fluctuate greatly,and the company will face the risk of equity pledge.In order to deal with the risk of equity pledge,many companies will take market value management measures to increase their stock prices,such as shareholders increasing their holdings of shares,conducting equity incentives,and repurchasing company shares.Existing literature shows that share repurchases can effectively and cost-effectively raise stock prices because they signal to the market that stock prices are undervalued.Therefore,for companies with equity pledge,stock repurchase is used as a common means to mitigate the risk of equity pledge.Taking W enterprise as the case study object,from the perspective of the equity pledge risk faced by the enterprise,this paper analyzes the effect of the stock repurchase behavior adopted by the enterprise in order to alleviate the equity pledge risk on the enterprise.This paper adopts the method of combining theory and case.First,it sorts out the relevant research literature on equity pledge risk and stock repurchase,and analyzes the equity pledge risk.Secondly,on the basis of researching relevant theories,it introduces the basic situation of W Enterprise Company.,summarizes the long-term equity pledge situation of W enterprise and the equity pledge risks it faces.Starting from the equity pledge risk faced by W company,it analyzes the necessity of the company to take stock repurchase;finally,it analyzes the changes of W company before and after the stock repurchase from the stock price trend,short-term market reaction and changes in financial indicators.Through the above research,the following conclusions are drawn:(1)Listed companies will adopt stock repurchase behavior in order to alleviate the risk of equity pledge.Under the situation of equity pledge by the controlling shareholder,W company tries to increase the stock price through the signal released by the stock repurchase.(2)The repurchase did not achieve the desired result in the end,because the company’s financial fundamentals were poor and its real performance was not enough to support the share repurchase.(3)Enterprises can get a short-term positive market reaction after the repurchase,but in the long run,the company’s stock price and finances will still show a negative reaction,and even exacerbate the company’s already poor financial situation.