An Empirical Study On Public Stock Repurchase Of Chinese Listed Companies

In mature share markets,share repurchase is a common tool for listed companies,especially under the systematic financial risk,many share prices fell sharply and seriously out of their own intrinsic value because the market is not rational.At this time,the listed companies will release share repurchase plan to tell the market that the price of share is undervalued,as traders they buy their own shares in the market and ultimately cancel shares to raise share prices through the positive feedback of market,this approach can not only maintain the price and maintain the stability of share markets,but also enhance the confidence of investors,maintain the interests of shareholders,establish the images of responsible companies in the share markets and create favorable conditions for future sustainable development of companies.After development of many years,the important roles of stock repurchase is also reflected in some aspects,such as improving the capital structure,reducing agency costs,replacing cash dividends and as a source of equity incentive plan.The first stock repurchase occurred in 1992 in Chinese share market,over the past more than 20 years,China's Securities Regulatory Commission continue to improve the relevant laws and regulations about stock repurchase to provide a relaxed environment for the listed companies,but listed companies did not show great interest in this international generic way.By the end of December 31,2016,there are less than300 stock repurchase plans in the market and there are less than 100 stock repurchase plans with the motivation of undervaluation.Before 2008,the stock repurchase requires administrative approval license,and it is often with the motivation of Chinese characteristics,for example,with the reform of non-tradable shares,the withdrawal of state-owned capital and dealing with long-term occupation on companies' funds of controlling shareholders;after 2008,record system replace approval system,listed companies can spontaneously repurchase public stock in the market based on specific purpose.At the same time,the financial crisis of 2008 and the stock market crash of2015 stroke the Chinese stock market deeply,the phenomenon of price undervaluation is very common,this paper focuses on the public stock repurchase behavior in the Chinese securities market under the motive of price undervaluation.Therefore,this paper selects the listed companies which repurchase public shares in China from October 10,2008 to December 31,2016 under the motive of price undervaluation as empirical research sample and draws the following mainconclusions:First,the phenomenon of price undervaluation in the research sample does exist and is very significant.Second,through researching the information of stock repurchase plan,this paper extracts three indexes which can reflect the companies' transmission to the market about the information of undervaluation: repurchase premium level,repurchase time interval and repurchase shares proportion,finding that there is a significant positive correlation between repurchase premium level and undervaluation level.Third,this paper uses event study method to verify the public stock repurchase plan can cause positive feedback of market,not only in the short term but also in the long term,at the same time eliminating insider trading.Fourth,this paper selects the four explanatory variables to examine the influence factors of the short-term market feedback.The empirical results show that the book to market ratio and the proportion of repurchase shares are significantly related to the short-term feedback,More concretely,the larger the book to market ratio and the proportion of repurchase shares,the greater the short-term feedback of the repurchase plan,and the relationship between the repurchase premium and repurchase time interval is positive but not significant.Fifth,this paper selected six explanatory variables to study the listed companies which has implemented or completed repurchase shares plan,in order to explore the influence factors of the long-term market feedback,the empirical results show that the price-to-book,net operating cash flow ratio and the size of the company assets are significantly related to the long-term feedback.More concretely,the smaller the price-to-book,net operating cash flow ratio and the size of the company assets,the greater the short-term feedback of public stock repurchase.Asset liability ratio,the main business revenue growth and the proportion of controlling shareholders is not significant to long-term feedback of market.