Research On The Motivation And Economic Effect Of DEHUA TB’s Stock Repurchases

Share repurchase is a common capital operation tool for listed companies,which can effectively play a positive role in a number of aspects such as stabilizing share prices,optimizing corporate capital structure and improving incentive mechanisms.In recent years,the level of China’s economic development has continued to improve,and the development of share repurchases has become faster and faster.In order to comply with the changes in the market situation,the SFC has made frequent amendments to the rules related to share repurchases,increased the policy support for share repurchases,and lowered the threshold for implementing share repurchases,providing a more convenient channel for listed companies.In this context,a company with multiple share repurchases is selected as a case study to analyze the motivation and economic effect of each of its repurchases,which enriches the relevant research while having some significance for other companies conducting repurchases.This study selects DEHUA TB,which implemented four share buybacks between2018 and 2021,as a case study.Firstly,it compiles the current development of share buybacks in China and introduces DEHUA TB’s basic situation and the process of buybacks,and analyzes the motives of its multiple buybacks based on signaling theory,principal-agent theory,and capital structure theory;Secondly,the event study method is used to analyse the market effects brought about by share buybacks,and the comparative analysis method is used to conduct an in-depth study of the changes in share price,basic financial indicators and capital structure during the buyback period to analyse the financial effects generated by share buybacks;finally,the conclusions of this thesis are drawn and relevant recommendations are made at both the company level and the investor level.The study of DEHUA TB’s four share buybacks found that,firstly,the motivations for DEHUA TB to implement share buybacks include sending positive signals,optimizing capital structure and improving long-term incentive mechanism.Secondly,the first three share buybacks generated certain positive market effects in the short term,and the share price also improved in the short term during the buyback period,but the effects were gradually weakened,and the market effects of the fourth buyback period were not obvious.Thirdly,share repurchases produced some positive effects in terms of profitability,but the expenditure of funds weakened the short-term solvency of the company and had an insignificant effect on operating capacity.In addition,share repurchases optimize the capital structure of the company.