Research On Motivation And Market Effect Of Yunnan Baiyao’s Share Repurchase

In recent years,due to the rapid development of China’s capital market and the continuous relaxation of the repurchase policy,more and more companies chose to implement stock repurchases,the number and amount of stock repurchase had also increased,and capital market had set off a " repurchase boom".The rise of stock repurchase in China’s capital market makes it more and more important to test listed companies’ real motivations and the market effect generated by repurchase.At present,most of the relevant domestic studies remain at the theoretical stage,and there are few studies on multiple repurchases of the same company within a short period of time,while there are few previous case studies on share repurchase in the Chinese medicine industry.In addition,scholars in China generally only compare the market effect of share repurchase with the overall market sentiment,rarely consider the industry market situation.Therefore,this paper selects Yunnan Baiyao,which has conducted several share repurchases in recent years,and analyses its three repurchases in detail to investigate the real motivations,then analyses the market effects from overall market and industry sector.This paper use three repurchases of Yunnan Baiyao as research object,first step describe the detail of it’s equity structure and financial status,explore whether Yunnan Baiyao has the strength to repurchase multiple times in short time.Secondly,analyze the scheme and process of three repurchases,then analyze has company learned any lessons after the first one was not fully completed.The analysis reveals that the schemes for the next two repurchases were significantly improved,company chose to use derivative transactions to control the actual repurchase costs and had a greater scope in setting the repurchase amounts.In addition,during the implementation process,Yunnan Baiyao adjusted the maximum repurchase amount and the number of shares based on actual share price to ensure the completion of the program.The official explanations for three repurchases of Yunnan Baiyao were all for employee stock ownership plan and equity incentive,however,through analysis,the motivations of repurchases are not limited to equity incentives,the hidden motivations are not publicized.The hidden motivations of three times all involve two factors : increasing stock prices and reducing agency costs,the two hidden motivations of two times involve optimizing the capital structure,and one time hidden motivation involve alleviating the risk of shareholder pledge,but three times all don’t involve substitute cash dividends.Then use event study method to analyze market effects of three repurchases,and judge whether repurchases have brought positive market effects by calculating the cumulative abnormal return rate during the window period.The results show that the three repurchases had brought a certain positive market effects to company,but the second repurchase duration was short,and stock price rose greatly before the day of announcement,suspected of information leakage.Finally,according to conclusions make some related suggestions,hope provide reference for other listed companies and investors to view stock repurchase rationally.