Share Repurchase And Share Reduction Of Large Shareholders

Since China’s Company Law revised the relevant system of share repurchase in 2018,the Shenzhen and Shanghai Stock Exchange has also adjusted the share repurchase system,relaxed the restrictive provisions of share repurchase,expanded the scope of allowing share repurchase,improved the decision-making procedures for implementation,and encouraged listed companies to repurchase shares.Since then,China has ushered in the wave of share repurchase.At the same time,some listed companies released the reduction plan of major shareholders shortly after issuing the repurchase plan.This kind of phenomenon has aroused widespread concern in the capital market.Generally speaking,the repurchase of shares by listed companies is regarded as a signal that the company’s market value is excessively undervalued,which is often regarded as good news by investors.Once a listed company implements share repurchase and writes off the repurchased shares,it means that the total share capital is reduced,which directly increases the company’s earnings per share and improves the company’s investment value.Therefore,share repurchase will be regarded as an effective tool to stabilize the stock price and enhance investor confidence during the downturn of the stock market.However,in addition to the capital demand,the reduction of shareholders’ holdings may also mean that there are potential risks in the stock or that shareholders are not optimistic about the future development of the company.These two contradictory signals are released at the same time,which inevitably puzzles investors.What are the motives for the reduction of shareholders’ holdings in the share repurchase plan? What is the behavior path? What effect will it have? Is it possible to cooperate with shareholders to reduce their holdings through share repurchase?After observing the above phenomenas,this paper studies the share repurchase and the reduction of major shareholders in the same framework,by consulting relevant literature at home and abroad,this paper comprehensively understands the relevant theoretical knowledge of share repurchase and shareholder reduction,sorted out the research cases of shareholder reduction with the help of share repurchase at home and abroad.Finally,selects the case of share repurchase and shareholders reduction of Haoxiangni Health Food Co.,Ltd whose share repurchase ratio hit a record high but controversial in the repurchase plan issued by A-share listed companies recently as the research object.Using literature research,statistical research,case analysis and event research to analyze the possible motivation,behavior path and effects of major shareholders’ reduction under the share repurchase of Haoxiangni Health Food Co.,Ltd.The motivation analysis is based on insider trading theory,signaling theory and wealth transfer theory.The analysis found that the reduction of large shareholders based on the share repurchase plan had the motivation of risk aversion,balancing the stock price and arbitrage.As the share repurchase will produce a positive market reaction,the announcement effect of share repurchase has attracted a large number of small and medium-sized investors to follow the investment,and the higher the stock price valuation has stimulated large shareholders to reduce their holdings.In addition,the large reduction of large shareholders during the stock repurchase period will cause negative effects such as reduced excess return,negative market reaction,damaged interests of small and medium-sized shareholders,and damaged corporate image.Through the research,the following conclusions are drawn:(1)The major shareholders have the motivation to use the share repurchase plan to reduce their holdings;(2)The ultimate purpose of the major shareholders’ share reduction based on share repurchase is to cash out;(3)After the introduction of the new regulations on shareholding reduction,share repurchase has become a compliance channel for major shareholders to reduce their holdings;(4)The negative effect of the major shareholders’ reduction based on share repurchase is significant.It is hoped that this case study can provide some ideas and methods for external stakeholders to understand the internal motivation of share repurchase of listed companies and the behavioral logic of shareholders’ reduction during the repurchase period.At the same time,it is also hoped to enrich the case study of shareholder reduction based on share repurchase by scholars at this stage,and provide some new ideas for the improvement of China’s share repurchase system.