Based on Taiwan listed companies which have been implemented in cash increase, capital reduction for making up loss or stock repurchase for capital reduction; this study discovers long term investment performance and operation performance of these companies in three years for the period of January 2001 to December 2004.
Study found that investors that buy stocks right after a cash capital increase was implemented, there might be capital losses; and if investors buy stocks after capital reduction for making up loss, then there is no obvious sign of capital gain or loss; buying stocks when stock repurchase for capital reduction, then there will be capital gain on long-term investment performance.
In the long-term operating performance, cash capital increase, and capital reduction for making up loss has not only failed to enhance profitability, but have a significant decline, and the company''s solvency got worse. Also, the total assets turnover ratio has slightly increased after cash capital increase, but after capital reduction for making up loss, the total asset turnover ratio did not change significantly. Stock repurchase for capital reduction significantly upgrade profitability and operating capacity, while total asset turnover ratio has slightly increased, but the company''s solvency did not change much.
Finally, results in the differential analysis found that the long-run performance of stock repurchase for capital reduction is evidently better than the performance of cash capital increase. Profitability and asset operating efficiency of cash capital increase and stock repurchase for capital reduction is better than that of capital reduction for making up loss. In addition, the solvency of stock repurchase for capital reduction is better than cash capital increase and capital reduction for making up loss. Similarly, the solvency of cash capital increase is better than capital reduction for making up loss.