Research On The Motivation And Market Effect Of “Fraudulent Share Repurchase”

Share repurchases,which first emerged in the capital markets in western developed countries,have now become a commonly used financial tool for listed companies in various countries due to the rapid development of the world economy and technology.Affected by the special national conditions in the early stage,most of the listed companies in China conducted share repurchases for the purpose of non-tradable shares,and failed to form a scale.With the improvement of the securities market and the introduction of documents for share repurchase,the scale of China’s share repurchase has gradually increased,and the ways and motivations for repurchase become abundant.The revision of the Company Law in October 2018 has further attracted widespread attention to share repurchase,with popularity continuing to rise.In addition,the CSRC and other departments have also proposed to further investigate and punish illegal insider trading,fraudulent share repurchases and other illegal activities.However,there are still some companies that take risk in fraudulent share repurchases to infringe on the interests of investors.Therefore,it is of practical significance to study the motivation of Chinese listed companies to announce repurchase and the market effect of repurchase announcement.In this paper,Bluedon share repurchase in 2018 is used as a case study.First,this paper sorts out literature at home and abroad,summarizes the research status of repurchase motivation and market effect.Secondly,it introduces the background and process of the share repurchase,analyzes the authenticity of its repurchase ability and motivation in terms of financial status and action events,finds that its capital status,solvency,operating conditions and profitability are not sufficient to support its repurchase;moreover,there are behaviors such as shareholder reductions,abnormal stock pledges,and asset sales during the repurchase process.For these reasons,this paper casts doubt on the sincerity of Bluedon’s share repurchase.This paper focuses on the short-term market effect caused by the repurchase plan and termination of repurchase,and finds that its fraudulent share repurchases may lead to information leakage,impure motives,and damage to the interests of investors,ultimately causing negative consequences.In the end,this paper puts forward targeted suggestions for the government,enterprises and investors.