Empirical Analysis Of The Reasons And The Market Impact Of Convertible Bond Issues

The convertible bond gets the extensive favor of listed company and investor worldwide as the financial derivative of a kind of advantage with both stock and bond. Since China allowed listed companies in the stock markets of Shanghai and Shenzhen to issue convertible bonds financing since the 1990s of last century, the development of the convertible bonds has been very slow. After equity financing heat in 2001, the state policies suppressed the seasoned equity offerings and investor sternly condemned the listed companies to circle money, so that the convertible bonds welcomed its development spring. Go through the hard way of the past 10 years, the convertible bonds is being understood and paid close attention to by Chinese listed companies and investors, and the convertible bonds have become new favorites of the market after seasoned equity offerings.This paper analyzes the reasons of issuing convertible bonds by investigating the financial situations of the list companies that ever announced to be prepared to issue convertible bonds and have issued convertible bonds, the result shows that the list companies want to reduce the financing cost and to get equities indirectly by issuing convertible bonds. The study also investigates the stock price effects of prepare-to-offers and offerings of convertible bonds, the empirical test shows that the stock price effects of prepare-to-offers are associated with significant negative abnormal returns, the abnormal returns of offerings are negative but insignificant. The announcement period return is insignificant positively related to the earnings per share.