The Research On China's B Share Stock Repurchase

B-share market of China was established in 1992. In the condition of RMB can not be freely convertible and foreign capital was forbidden in A-share market, the original intention of B-share market was to seek foreign investment for domestic enterprises. The establishment of B-share market can not only raise capital from abroad but also avoid foreign capital attacking China's securities markets which was at initial stage. However, till now, B-share market has been completely lost financing function and fully entered the function missing dilemma. Listed companies which issued shares in the B-share market are also facing serious problems such as the stock is significantly undervalued, the huge price difference between A and B shares and poor stock liquidity.1st December,2008, Livzon disclosured "Livzon Pharmaceutical Group Inc. bought back Domestically listed foreign shares (B shares) report". The next day, the Group officially launched Franc repurchase.22nd June,2009, Changan Automobile disclosure "Chongqing Changan Automobile Co., Ltd. bought back Domestically listed foreign shares (B shares) report".The next day, the formal implementation of the share repurchase Changan Automobile. The two cases were of great significance. As early as 1999, some theorists proposed the concept of using the way of repurchase B shares to solve the separate status of our country A and B-share market. But the follow-up study is always in the theoretical level.More financial scholars directly pointed out that listed companies has no power to buy B shares. B Share Repurchase solve A, B-share market is a fragmented concept of the status of the feasibility of listed companies has not been from the perspective of scholars, from the point of view of capital management. These two recent cases just have provided us with the materials, so that we can research B shares repurchasing from a practical point of view and the perspective of capital operation.In this paper, it adopted both theoretical analysis and empirical analysis.And it selected the cases of Livzon and Changan Automotive Group for study and used multiple case study method.The first step was separately analysis, then compare the two cases for cross-analysis, and have the conclusion last.When conducting a single case study, we use event study to analyze the short-term wealth effect. While in order to avoid one-sidedness of the wealth effect analysis, the paper also integrated a number of indicators measuring the impact of share repurchase to shareholders, listed companies and other stakeholders.This paper studied the background, the process, the result, the impact, the wealth effect of share repurchases to the single company. Then, through comparing the development stage of the company, the financial position of the company, the share price in B-share market, the purpose of repurchase, the results of repurchase, the impact of repurchase, it got final findings.Studies found that, before repurchaseing, the company need to have a period of rapid development and access to sustainable development stage, so as to generate sufficient cash to support the financial needs of repurchase. The internal and external financial conditions of companys should meet the financing needs of buy-back, but because of repurchase occurs at a long time, demand for funds is flexibile. The driven of repurchase B-shares existed in on the one hand the huge price difference between A and B shares made the B shares of great investment value, either as a listed company, or as market investors, on the other hand it cost smaller to adjust the shareholding structure. The companies must choose the right time to repurchase B shares because the time have direct impact on the success or failure of Share buy-back. The company must has a keen sense of observate and have accurate judge about the situation of capital markets. Listed companies repurchasing B shares is of great significance on the B-share market development and reform. The way of repurchase B shares then cancellation may be a gradual, market-oriented, paying a minimum cost to improve the fragmented status of A, B share market. In addition, this paper call for a relaxed approval process for repurchase to avoid delaying the best buy time and also raise the idea of repurchase B shares and then issuance A shares to promote more companies to buy back B shares.Previous studies on B-share repurchased are focused on the theoretical level of construction and demonstration, but not from a practical perspective and analyzing specific cases. This paper conducted the only two cases which occurred in B-share market lately as the research object, to analyze, summarize, and came the findings such as the driven of the B-share repurchase, the just time of repurchase and the significance of B shares buy-back.