Research On The Impact Of Stock Repurchase On Enterprise Value

Share repurchase is a means of capital operation.The number of listed companies using stock buyback to manage capital operation and market value has increased year by year.Compared with foreign countries,the development time of stock buyback is short,and the related system is not perfect.It is important to study the motivation and effect of stock buyback to further enrich the existing research on stock buyback and guide the listed companies in our country to rationally conduct stock buyback.Gree Electric Appliances’ 3-phase stock buyback from 2020 to 2021 was not long and involved A large amount,which created the highest annual A-share buyback in history and was very representative.Therefore,the research object of this paper is Gree Electric Appliances and its three consecutive periods of stock repurchase.Based on the theory of signal transmission,principal-agent and capital structure,this paper adopts analysis methods such as case study and literature analysis,and studies the motivation of Gree Electric Appliances’ third period of stock repurchase through event study method,economic added value analysis method and financial performance evaluation method.This paper focuses on the in-depth analysis of shareholder wealth,financial effect and the impact on the overall value of the enterprise,finds out the relevant problems existing in the process of stock repurchase,and puts forward some specific suggestions,which can be used as a reference for other companies intending to carry out stock repurchase.According to the research,the main motivations for Gree Electric Appliances to carry out stock buybacks include keeping the stock price within a reasonable range,optimizing and adjusting the capital structure,and replacing and supplementing cash dividends.In addition,Gree Electric Appliances also carries out continuous stock buybacks,offering equity incentives to the management and solving agency conflicts.From the perspective of shareholder wealth,on the one hand,the analysis of the stock price changes shows that although the stock price no longer declines after the buyback of the first phase,the stock price does not remain at a high level and does not significantly improve the equity value from the perspective of the third phase as a whole.On the other hand,through the analysis of AR and CAR by the event study method,it is found that although Gree Electric Appliances’ third-stage share repurchase has produced a certain positive market value in the short term,it is not sustainable and stable,and the effect is very limited.From the perspective of financial effect,Gree Electric Appliances’ financial indicators did not improve significantly because of the implementation of the continuous stock buyback program.Finally,from the perspective of the overall value of the enterprise,the income brought by the third consecutive share repurchase of Gree Electric Appliances was lower than the input cost,which failed to create economic benefits matching the cost for Gree Electric Appliances.