Stock Repurchase And Their Financial Effects

Share repurchase first originated from the United States, aimed at avoiding government control of the cash dividend. After nearly 50 years, it has become a common mode of operation of the capital in the western mature capital market. Share repurchase belongs to equity contraction in the company's reorganization of assets, in the form of company paid-up capital, the shareholding structure and capital structure changes. But in fact, share repurchases will affect the operational control and profitability. Although the repurchase of shares of the listed companies in our country is still in its infancy, however, it has demonstrated its unique role in the reorganization of the company's assets, stock price stability and so on. With the gradual integration between China's economy and international markets, as well as the gradual improvement and development of China's securities market, share repurchase of listed companies in China are bound to become a common financial behavior. Therefore, the study and exploration of the theory and practice of share repurchase is of positive significance to promote innovation and development of China's capital market and the reduction of the state-owned shares.This paper is divided into five sections to explain mainly from the theoretical study and the financial effect of share repurchase: The first chapter, to introduce the concept of the share repurchase, classification and the common share repurchase ways. In chapter two, mainly introduce the basic theories on share repurchase, in order to explore the intrinsic motivations and the internal mechanism of shareholders'wealth creation of the share repurchase. The chapter three is analysis of financial effect of share repurchases, mainly from financial objectives effects, financial leverage effects, dividend substitution effects and the negative financial effects to further explore the internal motivation of the share repurchase. Chapter IV is the application and share repurchase prospects in China through analysis occurred share repurchase cases, and then give the proposals related to Chinese share repurchase. As part of the final, conclusions were discussed basedon the author's understanding of the share repurchase.