An Empirical Study on Influence of Share Repurchases on Share Price in Chinese Stock Market

The number of firms that had repurchased their own stock increased sharply in the Chinese Stock Market. We focused on firms with announcements of share repurchase in the Chinese Stock Market. We investigated the relationship between the announcements and their firm value and causal relation between the characteristics of corporate and business performances by measuring AAR and CAAR during 2009-2013. We found that share repurchase announcements have a positive impact on the share price. To verify the small firm effect, we divided the samples into 10 large firms and 10 small firms. We found that the group of large firms has higher long- term returns than that of small firms. So this result did not support the “small firm effect” hypothesis. According to the results of the regression analysis, we found that stock repurchase rate and leverage have positive impacts on the stock returns. But we found that FCF has a negative impact on the stock returns. The result did not support the “Free cash flow” hypothesis.