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In order to learn about the stock price before and after the listed companies have their decisions of implementing capital reduction to make up for losses, and if the result due to reduction has ever affected the long-term investment performance and operating performance, this study has adopted two methods: event study and financial statement analysis. According to the results of study, after the decision of capital reduction has been made public, stock prices then have declined, and negative cumulative average abnormal returns have occurred as well, this means capital reduction to make up for losses on behalf of the market is interpreted as a negative signal. As for the long-term investment performance after calculating the capital reduction make up for losses, we have learned that the long-term investment performance of UNION PLUS TECHNOLOGY CO., LTD, for it continues to suffer from losses after it has implemented capital reduction, its cumulative average abnormal return (CAR) turns out to be negative; and as for the long-term investment performance of the turnaround after capital reduction, UNIFOSA CORP., its CAR turns out to be positive. At last, the financial position of operating performance of UNION PLUS TECHNOLOGY CO., LTD, which suffers from losses, has no significant improvement results. On the other hand, the turnaround after capital reduction, UNIFOSA CORP., its financial position of operating performance shows improvement over the deteriorating effects. Therefore, we can assume, if an issuing company wishes to make up for losses via capital reduction, or enhance earnings per share and promote stock price via reduction of share capital, its goal of enabling its investors to receive positive CAR would seem less effective. Ultimately, a company can only enhance its operating performance by improving its operation, so that investors may obtain positive cumulative average abnormal returns in the long run.
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