Empirical Analysis Of Market Effect Of Stock Repurchase In Chinese Listed Companies During Full Circulation Age

Listed company stock repurchase, using the accumulation of surplus income funds or debt financing, through certain legal procedures and efficient approach, buy back the outer common stock which the company has issued. Today, stock repurchase has become an efficient method of capital operation in the mature capital market, not only useful for tax avoidance or an alternative way of cash dividend, optimizing the capital structure and passing the signal to the market that the company’s share price has been underestimated, but also useful for coordinating equity incentive plans and improving company value. Stock repurchase originated from American in the1970s. It has become an important kind of capital operation mode and interest distribution policy in developed western capital markets. With the development and maturity of China’s capital market, stock repurchase which is an important financial instrument also draws attention of China’s listed companies and will be widely used by them. Especially shareholder structure reform has completed by the end of2006and it is the time of full circulation age. And on October9,2008, securities regulatory commission formally issued The supplementary provisions about repurchase shares by means of centralized bidding which promotes stock repurchase’s application and development in China. So, from the side of outstanding shares to study and analyze the market effect of listed company stock repurchase is of great theoretical and practical significance.On the basis of the above considerations, first,this paper states the basic theory of stock repurchase. Second, it analyses theoretically the development status of stock repurchase. And based on that, this paper taking those after-reform listed companies’ outstanding stock repurchase as samples, adopting the event study methodology to empirically test the short and long market effect of stock repurchase, and analyses the influencing factors of short market effect. Research conclusions of the paper are as follows:(1) from the side of development process of stock repurchase in China’s capital market, object of stock repurchase has turned from non-tradable share to tradable share, form of stock repurchase has turned from directed stock repurchase to open-market stock repurchase, purpose of stock repurchase has turned from stripping bad assets off, ensuring shareholder structure reform going smoothly and resolving controlling shareholder’s fund embezzlement to improving company value and cooperating with equity incentive plan.(2) Listed companies’ stock repurchase has positive short market effect in China, but the market effect has mainly reflected in the interval before the repurchase. The main influencing factors of short market effect are net assets to market price, operating cash flow ration, share proportion of largest shareholder and the number of companies in the same industry.(3) Listed companies’ stock repurchase has positive long market effect. From the side of the whole event window, the sample group with the purpose of cooperating with equity incentive plan has greater long market effect.