| Stock repurchase originated in the 1950 s in the United States.After more than half a century,the development of stock repurchase in the western capital market has become mature.In contrast,the development of share buybacks in China has lagged slightly.It was only in 2005 that a law was introduced to guide companies to boost their share prices through share buybacks.In 2008,authorities further eased restrictions on companies’ share buybacks,removing administrative checks before they could do so and encouraging more companies to start using them to stabilize share prices.In 2015,when the domestic household appliance industry encountered the winter market,combined with a sudden "irrational decline" in the broader market in late May,the share price of all electric companies fell sharply all the way.In this context,most home appliance enterprises began to implement stock buyback to improve the company’s share price.At the end of 2018,China amended the Company Law to once again relax the financing channels for stock repurchase and the use of Treasury stock after repurchase,thus enabling stock repurchase to play a greater role in enterprises.Midea Group has launched many stock repurchases since its listing.However,this paper only chooses the stock repurchase activities motivated by market value management implemented by Midea Group in 2015 and equity incentive implemented by Midea Group in 2019 as the research object,and uses case analysis,literature research and event research methods to study them.Choosing the two stock buybacks of Midea Group as the research object has two meanings: first,Midea itself has an important position in the home appliance industry,and the relevant research conclusions will be more representative;Second,the motivation for Midea Group to implement share repurchase changes with the market environment and policy system,and the correlation with enterprise development is worth studying.Therefore,this paper chooses two stock repurchases of Midea Group with different motivations as the basis of the case to analyze the economic consequences,hoping to provide some references for domestic enterprises to better use stock repurchases.In this paper,the motivation and economic effect of stock repurchase are firstly discussed.Secondly,it introduces the financial background of Midea Group and the specific process of the two buybacks before the implementation of the stock activities.Then the economic consequences of stock repurchase are analyzed from the perspective of market value management and equity incentive.Finally,based on the research results of the stock buyback of Midea Group,the following conclusions can be drawn: First,the effect of buyback based on market value management is as follows: in the short term,the stock buyback has a positive impact on the stock price of Midea Group,which makes the stock price increase;Long-term: the positive impact of stock repurchase on the company’s stock price and profitability is short,and the positive impact on its solvency may be offset by the financial pressure caused by stock repurchase itself,but it can have a long-term positive impact on its operating capacity and growth capacity.Ii.The effect of buyback based on equity incentive is as follows: stock buyback promotes the innovation of Midea Group and has a positive impact on its long-term development,but attention should still be paid to the introduction of highly educated talents.Based on the above conclusions,this paper suggests that enterprises should decide whether to use stock repurchase for market value management according to their own reality.At the same time,the combination of stock buyback and equity incentive can be considered to enhance the enterprise’s own strength.At the same time,relevant departments should strengthen specific regulations and enhance the compatibility of stock repurchase system with the development of our capital market. |
