Fixed effect test results.

Share repurchase is not only an important financial policy of the company, but also a financial policy with a very wide range of influence. A scientific and reasonable share repurchase policy has a significant financial effect in terms of an equity structure optimization, capital structure adjustment, cash holding control, and even management compensation system design. The long-standing share repurchase in the U.K. and U.S. companies and the recent practice of share repurchase by Chinese listed companies imply an important financial proposition: share repurchase is a high-quality financial policy that, when properly applied, will help reduce the cost of capital. The data in this study show that share repurchases can reduce the level of firms’ cost of capital and play an important role in enhancing their competitiveness. This study also finds that Chinese listed companies, when formulating and implementing share repurchase programs, do not subjectively view share repurchases as a policy tool to adjust cash holdings and capital structure. In addition, they do not view share repurchases as an alternative to cash dividends but use equity incentives for management as the main intention for share repurchases. This decision-making concept is not conducive to the rational use of share repurchase policies in the long run and should be a cause for concern in the business community. Finally, the leverage and the cash holding path are the main motives affecting share repurchases and are the important fundamental mechanisms in this study, while the mediating mechanism test finds that share repurchases mainly reduce the cost of capital through two information perspectives of analyst following and stock liquidity. The heterogeneity analysis shows that the role of share repurchases in reducing the cost of capital is more obvious in enterprises with fierce product market competition, high institutional investor shareholding.