| Summary: | 碩士 === 東吳大學 === 會計學系 === 96 === "Capital Reduction", the important decision-making considerations for the company, is designed to solve the expansive pressure of capitals. Capital reduction concerns about the value and growth of the company has two different types. First of all, if the capital reduction was not reduce the company's property, then it is called the "formal capital reduction", which usually accompanied with a negative stock price. On the other hand, “the essence of the stock reduction” is called if a company reduce the company's property. The essence of the stock reduction can be divided into the capital reduction based on The Company Law, and The Securities and Exchange Law. They both can bring positive stock price and solve the problem about the over-expansive capital, which helps the company's idle funds and financial planning well. They seem to be similar for the purpose and benefit. However, these two reductions should have the different stock price reaction after the reduction news released to the market according to the different laws norms, the reduction procedures and the reduction range. There is no previous studies for the different stock price reaction between the capital reduction based on The Company Law and The Securities and Exchange Law. Therefore, this study would analyze and compare the different stock prices between these two reductions.
The findings of this study are as follows. When a company releases the message about the capital reduction based on The Company Law, it means that a company owns the stable profit. At this time, the company is more willing to use the idle funds and creates greater shareholder’s value; thus, the company shrinks the capital and returns it to shareholders in order to reflect the real profitability. However, when a company releases the message about the capital reduction based on The Securities and Exchange Law, the market may presume that it may be a strategy to save the over-low stock price instead of having abundant cash flows and stable profits. Therefore, the markets have more expectations on a company with the capital reduction based on The Company Law than the capital reduction based on The Company Law. This would react on the stock price. That is the reason why the positive stock price reaction on the capital reduction based on The Company Law is greater than the capital reduction based on The Company Law.
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