Stock Repurchase Market Response under Performance Differences: An Event Study Based on Heng Rui Medicine and Hong Yuan Pharmaceutical

This paper uses the event study method to examine the market response of stock repurchase announcements on stock prices, taking Heng Rui Medicine and Hong Yuan Pharmaceutical as case studies. The event window (Day -10 to Day +10) is selected to analyze actual returns, excess returns, and cumulative excess returns, with t-tests conducted to verify the significance of differences. The results reveal the heterogeneous effects of repurchase announcements on the market. The findings show that Heng Rui Medicine, with solid fundamentals and a strong financial position, gained market recognition for its repurchase announcement in the later stages, showing a positive “value recovery” effect with a stable increase in stock prices. In contrast, Hong Yuan Pharmaceutical, facing performance pressure and lacking market trust, saw its repurchase announcement interpreted as a “market support” strategy, which triggered a negative response and led to a signal backlash, resulting in poor stock price performance. This study emphasizes that the key to whether a repurchase announcement sends a positive signal lies in the company’s fundamentals and the level of market trust, not in the announcement’s format itself. Based on this, the paper suggests that managers optimize the timing of repurchases and transparency in information disclosure, regulators enhance market regulations, and investors make rational investment decisions. The paper also points out the study’s limitations, such as the small sample size and the subjectivity in choosing the event window, and suggests that future research could extend to more industries or longer periods.