Research On The Motivation And Effect Of Share Repurchase In Digital China

With the continuous development of the capital market and the continuous improvement of share repurchase related policies,the implementation of share repurchases by listed companies in China has become more and more frequent,especially after the revision of the relevant contents of the Company Law in 2018 the application of share repurchases has increased and its scale has become increasingly large.The motives for share repurchases by listed companies are diverse,and the resulting effects may be both positive and insignificant or negative.In addition to the mainstream motives such as sending signals of share price undervaluation,employee motivation and improving capital utilization,some companies’ controlling shareholders also manipulate share prices to implement share repurchases.Therefore,it is of practical significance to investigate the motives and effects of share repurchases of listed companies.This paper analyzes the current situation of share repurchase of listed companies,reviews relevant literature on share repurchase,studies the motivation and effect of the three share repurchases of the case company Digital China from 2018 to 2022 based on signal transmission theory,principal-agent theory and financial leverage theory,and puts forward suggestions from different perspectives.The analysis of the main and potential motivations of the three share buybacks of Digital China shows that the main motivation for all three share buybacks is to increase the share price and to conduct subsequent employee stock ownership plan or equity incentives.In addition,the first share repurchase and the third share repurchase may also have the potential motive of avoiding the risk of closing out the equity pledges.Based on the analysis of the effect of Digital China’s three share buybacks,the following conclusions are drawn:(1)From the perspective of capital market effect,the positive effect of the first share repurchase is not obvious in the short term,but the stock price of the company has an obvious upward trend after the completion of the repurchase;The second share repurchase has no obvious positive effect,and the company’s stock price has no obvious upward trend after the repurchase.The third share repurchase produced short-term positive effects,but the company’s stock price did not continue to rise after the completion of the buyback.(2)From the perspective of capital structure,the three share repurchases have no significant impact on the company’s capital structure.(3)From the perspective of financial performance,the three share repurchases have no significant impact on the solvency;The first share repurchase and the third share repurchase promoted the improvement of the company’s profitability to some extent,while the second share repurchase did not have a positive impact on the company’s profitability.(4)From the economic value added index,the previous two share repurchases failed to promote the company’s economic value added.In general,the first share repurchase and the third share repurchase produce positive capital market effects and financial effects to a certain extent,while the second share repurchase has no positive effects.