Research On The Motivation And Economic Consequences Of Share Repurchase Of Listed Companies

As a common way of capital operation and corporate finance behavior,share repurchase plays an important role in the western mature capital markets increasingly.Share repurchase can not only optimize the capital structure of the company,improve the level of corporate governance,return to investors instead of cash dividends,but also play a positive role as a signal to the outside world that the company's stock price is undervalued and the management has confidence in the future development of the company,so as to promote the company's stock price.Compared with share repurchase in some western countries,share repurchase in China started later,with a shorter history and more restrictions.Therefore,it also makes share repurchase have distinct local characteristics in China.Tracing back to the history,the early share repurchase in China was mainly used to reduce the state-owned shares,cooperate with the reform of non-tradable shares and improve the capital structure of state-owned enterprises.With the continuous improvement and development of China's capital market,the purpose of share repurchase of listed companies has become more complex and diversified.Many companies tried to achieve the purpose of the management of market value,implementation of equity incentive and stabilizing and improvement of the company's share price through share repurchase Consequently,share repurchase attracts more and more attention in China's securities capital market.Since the stock disaster in July 2015,China's A-share market has been in a long-term downturn.The stock prices of many companies have continued to fall affected by some bad news(such as Sino-US trade frictions,new regulations on asset management)additionally.In this case,the implementation of share repurchase had become very active.Its main purpose is to try to stimulate the company's share price return to its intrinsic value through share repurchase.In order to stabilize the market and stimulate economic development,China government gradually relaxed the control of share repurchase based on the successful experience of share repurchase in some western countries.The new regulations of stock repurchase issued in 2018 have increased the circumstances allowing companies to carry out stock repurchase,simplified the decision-making procedure of implementing stock repurchase and established the treasury stock system.The downturn of the capital market,loosening of the policy and the superposition of the company's recognition will push the share repurchase to the climax in China.From January 2018 to February 2019,the total repurchase amount of listed companies in China reached 45.887 billion yuan,an increase of about five times compared with the repurchase amount of 9.199 billion yuan in 2017.Therefore,2018 can be called the "repurchase year" of A-share market.Share repurchase have played an important role in a decade-long "bull market" in U.S.stocks since the 2008 financial crisis.Compared with the "pro-cyclical" share repurchase in the United States in recent years,China's A-shares tend to carry out centralized repurchase in market downturn which has an obvious "counter-cyclical" feature.This anomaly has caused the thinking of the stock repurchase in our country.Based on the stock market downturn,equity pledge risk increased,economic growth slowed down background,it becomes more theoretical and practical significance to explore the real motivation behind the share repurchase of listed companies and the impact of the repurchase on the company.Based on the existing research results and the special institutional environment in China,this thesis takes the signal transmission theory,principal-agent theory,information asymmetry theory and financial effect theory as the foundation.By using the method of normative research and empirical research,Firstly,this thesis analyzes the motivation of share repurchase of listed companies in China;Secondly,it studies the influence of stock repurchase on cost of debt,investment efficiency and the mechanism,and further investigates the influence of refinancing demand,marketization level of the region,monetary policy,equity refinancing,property right nature,agency cost and other factors to consolidate the logical chain of this thesis and exclude other factors;thirdly,This thesis studies the impact of stock repurchase on the risk of stock price crash and its mechanism from the aspect of stock market efficiency.Finally,combined with the research findings,this paper puts forward some relevant policy recommendations,such as.strengthening the supervision of the high proportion of share pledge repurchase companies,scientific and rational use of share repurchase as a financial tool,timely establishment of treasury stock system to implement the long-term incentive mechanism.The findings of this study are as follows:Firstly,the motivation of share repurchase of listed companies in our country is diversified.At present,the main motivation of share repurchase is to alleviate the risk of major shareholders' equity pledge,improve the company's share price and reduce the company's agency cost.The specific performance is as follows: the higher the proportion of major shareholders' equity pledge is,the more inclined the company is to carry out share repurchase.The main motivation of repurchase is to alleviate the pressure of the major shareholders' equity pledge margin recovery and the possible risk of closing positions due to the decline of stock price.Share repurchase becomes the "talisman" of major shareholders' equity pledge.The more undervalued the company's stock price is,the more likely the company is to carry out share repurchase.The motivation is to transmit the positive signals that the share price is undervalued and the company has confidence in the future development to the outside world,and to stimulate the improvement of the company's share price.The greater the agency cost is,the greater the probability of carrying out share repurchase is,and the motivation is to reduce the agency cost of the company.Secondly,share repurchase can significantly affect the company's debt financing cost.Listed companies can reduce the information risk and debt agency risk of the company through share repurchase,thus effectively reducing the debt financing cost of the company.Specifically,share repurchase can reduce the degree of earnings management,improve the accounting robustness,and improve the quality of accounting information.The quality of accounting information will directly affect the setting of the company's debt contract.The higher the quality of the company's accounting information,the higher the credibility of its predicted future cash flow,and the lower the risk of default that the company can't repay the loan on schedule.Accordingly,the creditor will demand a lower risk premium,and then effectively reduce the company's debt financing cost.In addition,further research found that the effect of share repurchase on reducing debt financing cost is more obvious in the companies with high agency cost,low degree of marketization degree and non-state-owned enterprises.Share repurchase can still significantly reduce the debt financing cost of the company excluding the impact of monetary policy and equity refinancing.Thirdly,share repurchase has a significant impact on the investment efficiency of enterprises.Share repurchase improves the investment efficiency by reducing the agency cost.The specific performance is that share repurchase effectively reduces the over investment behavior of enterprises,but at the same time it does not affect the insufficient investment of the company;in the process of share repurchase affecting the investment efficiency,the agency cost plays a part of intermediary effect;further analysis shows that the effect of share repurchase on reducing the inefficient investment is more obvious in enterprises without refinancing demand and enterprises with higher market-oriented degree in the region.Fourthly,share repurchase can significantly affect the risk of stock price crash.Share repurchase can effectively restrain the risk of stock price crash by improving the accounting robustness of the company.Specifically,share repurchase significantly reduces the risk of stock price crash,and the larger the proportion of repurchase is and the more the times of repurchase is,the more significant the effect is;in the process of share buyback affecting the risk of stock price crash,accounting robustness plays a part of the intermediary effect;further analysis shows that the effect of share repurchase on reducing the risk of stock price crash is more significant in companies with serious stock price undervaluation,more analysts tracking and lower equity pledge ratio.The main contributions of this study are as follows:Firstly,it enriches the literature research on the motivation of opportunistic behavior of share repurchase.The existing domestic literature on the motivation of share repurchase mainly focuses on the early reduction of state-owned shares,cooperation with the reform of split share structure,free cash flow hypothesis,equity incentive and stock price undervaluation,rarely involving the motivation from the perspective of the opportunistic behavior of share repurchase.Therefore,This paper constructs an empirical model to explain the motivation of stock repurchase,taking into account the unique institutional background environment of listed companies in China,and increasing the impact of the local factor of large shareholders' equity pledge,this paper empirically examines the opportunistic behavior motivation of stock repurchase under the condition of large shareholders' equity pledge in order to alleviate the pressure of margin call and liquidation risk,which enriches the relevant literature on the motivation of stock repurchase.Secondly,it expands the research on the economic consequences of share repurchase on real economy and stock market efficiency.At present,most of the researches on the economic consequences of share repurchase in the domestic literature focus on the market effect and financial performance,rarely involving the impact of share repurchase on other financial policies of the company.On the one hand,this thesis analyzes the impact of share repurchase on the financing cost and investment efficiency of the company from the perspective of real economy;on the other hand,it studies the impact of share repurchase on the risk of stock price crash from the perspective of stock market efficiency.This provides theoretical support and empirical evidence for share repurchase to give full play to its "market stabilizer" function,improve the function of stock price and promote the healthy and orderly development of capital market,it enriches the literature on the economic consequences of share repurchase.Thirdly,it further enriches the relevant research on the cost of debt financing and the risk factors of stock price crash.Although there are many researches on the influence factors of the company's debt financing cost and the risk of stock price crash,there are few researches on the influence of share repurchase on the company's debt financing cost and the risk of stock price crash in China at present.The main reason lies in the late start of share repurchase in China,and the share repurchase system of "principle prohibition,exception permission" restricts the development of share repurchase in China.For the first time,this thesis takes the sample data of share repurchase of listed companies in China to study the impact of share repurchase on the cost of corporate debt financing and the risk of stock price crash,provides empirical evidence that share repurchase reduces the cost of corporate debt financing and inhibits the risk of stock price crash,and clarifies its mechanism and path.To a certain extent,this thesis enriches the relevant literature of the research on the factors affecting the cost of debt financing and the risk of stock price crash.