A Case Study Of Xinbao Co.Ltd’s Share Repurchase

In 2018,the Shanghai stock index rose from 3578,the highest in January,to 2493,the lowest in December,with an amplitude of more than 1000 points,with an annual decline of33.09%;Shenzhen composite index dropped from 11178 points at the beginning of the year to7240 points at the end of the year,with a drop of 35.23%.The trend of A-share market is in a downturn.In the same year,China amended the company law,adding two situations: "using shares to convert convertible corporate bonds issued by listed companies" and "necessary for listed companies to maintain corporate value and shareholders’ equity",relaxing the restrictions on stock repurchase.The downturn of the securities market and the relaxation of the repurchase policy led to a surge of repurchase cases in 2018.In China’s A-share market,a total of 892 companies announced stock repurchase in 2018,more than doubled compared with 2017.With the gradual use of stock repurchase,stock repurchase has gradually become a market value management tool for listed companies when the stock price is low.Therefore,the study of stock repurchase cases has reference significance for listed companies to carry out stock repurchase.Taking the stock repurchase case of Xinbao in 2018 as the research object,this paper focuses on the motivation,scheme and effect of the implementation of the stock repurchase of Xinbao by means of comparative analysis of financial indicators and event research.In the aspect of stock repurchase motivation,this paper not only analyzes the announcement motivation of Xinbao shares,but also finds out the deep motivation to alleviate the pledge risk of major shareholders through in-depth analysis;In the aspect of financial effect of repurchase,it focuses on the cost of capital and financial ability;In the aspect of the effect on shareholders’ wealth,this paper studies the change of ownership structure before and after stock repurchase and analyzes the influence on shareholders’ wealth through EVA economic value-added method;In the aspect of market effect,we use the event study method to calculate and analyze the excess return rate and cumulative excess return rate before and after the stock repurchase,and select the stock repurchase of 15 companies in the same industry that do not have major shareholders’ equity pledge to make a comparative analysis to evaluate the market effect of the stock repurchase of Xinbao.Through the research and analysis,this paper draws the following enlightenment:(1)from the perspective of enterprises,stock repurchase should choose the appropriate way and time,and fully consider the role and effect of stock repurchase,rational use of stock repurchase this way;When the scale of stock repurchase is small,the impact on the company’s financial indicators is limited;When the market is in a downturn,stock repurchase can only temporarily increase the stock price,which can not be used as a long-term support for the increase of stock price;(2)From the regulatory level,we should improve the mechanism of stock repurchase,standardize the information disclosure of stock repurchase,explore a reasonable pricing system of stock repurchase,avoid stock repurchase becoming a means for shareholders and managers to obtain interests,protect the interests of small and medium investors,and maintain market order.