Can Share Repurchase Promote The Stock Price?

Share repurchase refers to the listed company's conduct of repurchasing its' own issued shares by its own funds or financing funds for the purpose of market value management,optimization of capital structure and equity incentive.The concept of share repurchase originated in the United States and was later popularized in capital markets around the world.In mature capital markets such as European and American countries,share repurchase is often used as an effective means of stock price adjustment to improve stock price and realize the interests of shareholders.With the continuous progress of China's reform and opening up,the capital market has become increasingly sound and the institutional improvement construction has been constantly strengthened.As an important capital withdrawal mechanism and value distribution mode,share repurchase is increasingly used by listed companies in China,and the regulatory authorities regard it as a tool to maintain the orderly development of the capital market and attach importance to it.On the basis of reviewing relevant theories and practices of share repurchase at home and abroad,this paper sorted out the share repurchase cases of a-share listed companies from 2012 to the end of October 2018 with the purpose of stabilizing stock price.Combining with empirical evidence,this paper proves that share repurchase also plays a positive role in stabilizing stock price in China's capital market.The scale of buyback plays a significant role in stabilizing the stock price.The larger the scale is,the larger the increase of the stock price will be.This proves that the signal transmission theory is applicable to China's stock buyback market.After differentiating bull and bear markets,it is found that buyback is more active in bear markets,which means share repurchase has the effect of counter-cyclical regulation to some extent.On this basis,taking Lingrui Pharma company's share repurchase event as an example,this paper analyzes the motivation of the company's share repurchase and finds that the purpose is not only to stabilize the share price,but also to hide other adverse motives.At the same time,the short-term and long-term effects of corporate buybacks are analyzed by using the event research method and financial analysis method,and it is found that share repurchase can improve stock price in the short term,but it has no obvious long-term effect on stock price due to little change in financial and management aspects.