Analysis On The Motivation And Effect Of Share Repurchase

At the end of 2018,the new Company Law was promulgated.Subsequently,China Securities Regulatory Commission and Shanghai and Shenzhen Exchanges also issued support announcements and implementation rules.Share buybacks have increased and implementation procedures have been improved.In recent years,due to the deepening cognition of listed companies on share repurchase,as well as the encouragement and support of the government and the capital market,more and more companies carry out share repurchase behavior.In this practice,many problems also appear,such as the company’s real motive of repurchase is not pure,and the effect after the implementation of share repurchase is not ideal.Since 2022,listed companies have been enthusiastic about share repurchase.Vanke,as a leading enterprise in the real estate industry,carried out share repurchase in 2022 with a large scale.Combined with the current high attention of the real estate industry and the timing and characteristics of Vanke’s repurchase,this paper takes Vanke’s share repurchase event in 2022 as a case study and analysis.This paper first focuses on the relevant research background,from which the concerns are raised.Secondly,this paper sorts out relevant research on share repurchase at home and abroad,and establishes an analytical framework for the motivation and effect of share repurchase in this paper.Subsequently,after reviewing the case,the relevant data before and after Vanke’s share repurchase are used for a comprehensive analysis.In terms of buyback motivation analysis,this paper takes stock price as the main analysis,evaluates Vanke’s buyback ability based on its financial situation,and focuses on the company’s relevant behaviors before and after buyback,taking the buyback ability and related behaviors as the support to prove Vanke’s buyback motivation.In terms of buyback effect analysis,the market effect of Vanke’s share repurchase was evaluated by using the method of stock price trend and event study,and the financial effect was analyzed by comparing the financial indicators such as solvency and operating ability before and after the repurchase.The study found that the specific situation of Vanke’s share repurchase conforms to the motivation stated in its announcement,and also brings a certain positive effect.Faced with low stock price and undervaluation,Vanke has a good ability to buy back shares.Other behaviors of the company are consistent with the purpose of share buyback.After the share repurchase,Vanke’s stock price rose slightly in the short term,which did not cause significant negative impact on the company’s financial status and solvency,but had a partial addition effect on the operating status and profitability.Through the above detailed analysis,this paper draws two enlightenments.On the one hand,small and medium-sized investors should rationally judge the share repurchase behavior carried out by listed companies and invest cautiously.On the other hand,the share repurchase of listed companies requires a comprehensive understanding of the company’s situation,matching the required investment with the expected effect in the later period,and avoiding the unprofitable capital arrangement.