Research On The Motivation And Effect Of Yili Share Repurchase

In the 60 s and 70 s of the 20 th century,developed Western countries began to promote the share buyback system.For a long time thereafter,the system was widely used by companies to improve capital structure and raise stock prices.Due to the relatively late development of China’s market economy,the initial share repurchase was mainly based on the repurchase of government bonds.It was not until after the "stock crash" in 2015 that Chinese companies began to widely implement share buybacks on the public stock market.Since 2018,there has been a significant increase in the number and amount of businesses participating in buybacks.Therefore,in-depth study of the motivation and impact of stock buybacks is of crucial significance for further understanding of the internal mechanism of modern market economy.This thesis uses case analysis to deeply explore the motivation and effect of Yili stock repurchase.Firstly,the background significance of stock repurchase is introduced,and relevant literature at home and abroad is sorted out and commented upon.Then,the theory of share buyback and the research methods used are introduced.Third,based on the case of Yili share repurchase,the background and process of stock repurchase are introduced,and the motivation is analyzed.Fourth,from the perspectives of financial effect and market effect,combined with traditional indicators and EVA economic growth rate model,the impact of stock repurchase on corporate finance is deeply studied.In addition,the event research method is used to evaluate the impact of stock buybacks on stock prices based on changes in excess returns and cumulative excess returns.Finally,countermeasures and suggestions were put forward.According to the study,in addition to the motivation to use announcements to drive up stock prices and equity incentives,share buybacks have other purposes,such as increasing earnings per share,optimizing capital structure and reducing free cash flow.Through the analysis of financial effects,the first share repurchase has a significant positive impact on the profitability,short-term solvency and long-term solvency of Yili shares,but has little impact on operating capacity,growth ability and cash flow.During the second share repurchase,Yili’s operating capacity and growth ability were improved to a certain extent,but it had no significant impact on profitability and long-term solvency,and its short-term solvency and cash flow decreased significantly.According to the research results,buyback announcements can indeed stimulate the rise in stock prices,but the effect is not long-lasting.After conducting in-depth investigation on the repurchase process of Yili shares,it was found that it had problems such as the short role of repurchase announcement,improper timing of repurchase and single source of repurchase funds.Therefore,a series of suggestions were put forward,such as carefully formulating repurchase plans,accurately choosing the timing of repurchases,and diversifying repurchase funds,etc.,to solve the above problems.