Analysis of Motivation and Financial Effects of Stock Repurchase by Listed Companies Based on Tencent Holdings

Abstract

With the gradual improvement of various systems in China's securities market, the advantages of stock buybacks have emerged, and the research object of this paper is the stock buyback event of Tencent Holdings in 2022. Through a comparative study of the financial data of Tencent Holdings, it is found that the motivation of Tencent Holdings' share repurchase includes (mainly potential motivation) the following, i.e., to improve the stock price, to improve the earnings per share, to optimize the capital structure of the enterprise, and to make full use of the cash flow. Tencent Holdings attempts to signal to investors that the company's share price is severely undervalued through share repurchases, attracting the attention of market investors, stabilizing and enhancing the share price, and increasing the overall market value of the enterprise. After analyzing the relevant financial indicators, this paper finds that share buybacks have no impact on Tencent Holdings' good solvency and profitability, which can enhance its operating capacity, and have not affected its shareholding structure. Against this background, this paper focuses on the motivation of Tencent Holdings' large-scale share buybacks on the Hong Kong Stock Exchange, as well as the chain reaction after the buybacks, and whether it can bring a positive financial effect to the enterprise is of significant significance to the maintenance of the listed company's market capitalization.