| In the 1980 s,the western capital market was deregulated and the competition among the companies was fierce.Since then,share buyback has become a common way to control and stabilize the stock price and counter hostile takeover.However,in recent years,the capital market in China has been in a continuous downturn.Influenced by unstable factors at home and abroad,the stock price fluctuates violently,which leads to the fact that the stock price and the company’s own actual situation cannot be matched correspondingly.Investors often invest through the stock price situation,so the confidence in some companies is not high.The management of listed companies have made this situation through share buyback Get some relief and solution.However,some companies will hide part of the actual motivation in the announcement and disturb the judgment of investors.Therefore,it is of great practical significance to study the real causes and effects of share buyback in this environment.Moreover,in the A-share market in 2018,Midea Group’s buyback is the largest conventional buyback,so it is more representative.This paper first summarizes the literature of domestic and foreign scholars related to share buyback,and then introduces the theoretical basis related to share buyback.Taking signaling theory,earnings per share theory and free cash flow theory as theoretical support,this paper analyzes the real motivation of Midea’s share buyback,and finds that in addition to the announcement mentioned in order to protect the external image of the company,in order to conform to the actual situation of the company,the stock price tends to a reasonable state,in order to protect the relevant benefits of investors and enhance investment In addition to the investors’ confidence in the stock,there are also the reasons for controlling and stabilizing the stock price and making full use of the cash flow.Using the event study method to analyze the market effect of Midea Group’s buyback,we find that the announcement before the buyback has a positive impact,which can make the stock price fluctuation in a reasonable range and produce a positive market effect as a whole.This paper analyzes the financial effect of share buyback of Midea by using the method of financial index analysis,and finds that the share buyback has a limited positive impact on the short-term and long-term operating capacity of Midea,and has a negative impact on the company’s long-term solvency;but it strengthens the company’s profitability and short-term solvency,and effectively improves the company’s short-term and long-term solvency Ability to grow.So as a whole,the share buyback has brought positive financial effect to the company.Then,using the factor analysis method to analyze the company’s financial indicators,we get the conclusion that the share buyback will have a negative effect on the company’s solvency,and further verify the conclusion of the financial indicators’ method.Finally,in view of some problems existing in share buyback,some suggestions are put forward,such as paying attention to information disclosure,investors’ accurate understanding of share buyback motivation,and companies’ reasonable buyback.It can be used for reference by Midea Company and other companies that are in the process of or plan to carry out share buyback,and it can also bring some enlightenment for the rational investment of small and medium shareholders. |
