Empirical study about the influence onfinancial performance of capitaldeduction,purchases of treasurystock and cash refund done by listedcompanies in Taiwan Stock Market

• Main Authors: Shu-Chuan Wu, 吳淑娟
• Other Authors: Yen-Cheng Yang
• Format: Others
• Language: zh-TW
• Published: 2008
• Online Access: http://ndltd.ncl.edu.tw/handle/42703221323737436599

碩士 === 中原大學 === 會計研究所 === 96 === Recently, as a result of remaining in the state of financial loss over a long period, many companies have conducted capital deduction according to Company Law to fortify their financial structure. This is due to the fact that capital reduction may result in a decrease in capitalization; thus if a company’s overall profit status remains unchanged, then profit related calculations, such as EPS, NAVPS and return on shareholders’ equity, etc., will be expected to rise. As the first example among local TSEC and OTC-listed companies, Grand Formosa Regent Taipei performed a capital reduction by cash in 2002, and it turned out to be a successful story. Due to its maturity in the hotel industry, its overall stable profit, its sufficient capital without debts, and the fact that it has no short-term and mid-term material capital disbursement plan, using capital reduction to strengthen its financial structure was an appropriate method. In light of Grand Formosa Regent’s successful story, capital reduction by cash has started to make its way through Taiwan’s TESC and OTC-listed companies as of 2006. Returning idle capital to shareholders can not only elevate NAVPS and the return on shareholders’ equity, but also create a win-win scenario for both the company and its shareholders. This study used a two-sample t-test to verify if there is significant variance in corporate financial performance for companies using any of the following three capital reduction methods: reduction of capital to cover losses, purchase of treasury stock, and reduction of capital by returning cash. The empirical results indicated that, following a capital reduction to cover losses, a company’s debit ratio showed a significant decline, which supported Hypothesis 1-1; book-to-market ratio showed a significant decline, which supported Hypothesis 1-2; revenue growth showed a significant rise, which supported Hypothesis 1-3, EPS showed a significant rise, which supported Hypothesis 1-4, and return on shareholders’ equity also showed a significant rise, which supported Hypothesis 1-5. After purchase of treasury stock, a company’s debit ratio showed a significant decline, which supported Hypothesis 2-1; book-to-market ratio showed a significant rise, which supported Hypothesis 2-2; revenue growth showed a significant decline, which supported Hypothesis 2-3, EPS showed a significant rise, which supported Hypothesis 2-4, and return on shareholders’ equity showed a significant rise, which supported Hypothesis 2-5. Following a capital reduction by cash, a company’s debit ratio was raised, which failed to support Hypothesis 3-1; book-to-market ratio declined, which did not support Hypothesis 3-2; revenue growth declined, which did not support Hypothesis 3-3, EPS was raised, which did not support Hypothesis 3-4, and return on shareholders’ equity was also raised, which did not support Hypothesis 3-5.