Issue Influencing Factors And Annoucement Effect Of Convertible Bonds

With the continuous development of domestic capital market, in order to attract the attention of investors, a growing number of domestic listed companies are inclined to issue convertible bonds which have relatively high earnings but low financing costs. Convertible bonds have become a financing means that cannot be ignored on the domestic capital market. With the rapid development of domestic convertible bonds market, we urgently need to theoretically strengthen the study of convertible bonds. In foreign countries, many scholars have conducted the research on the issue influencing factors and announcement effect of convertible bonds. Their research conclusions are supported by some theoretical models. With the continuous development of relevant theories, the new research literatures are constantly emerging. Because Chinese capital market development is not enough mature, there are significant differences in the policy environment and operational mechanism between at home and abroad. The number of companies issuing convertible bonds is limited at home. Domestic scholars’study is around the pricing problem of convertible bonds, and the domestic research is still inadequate on the issue influencing factors and announcement effect of convertible bonds. The purpose of this paper is to discuss the issue influencing factors and announcement effect of convertible bonds based on the calculation and analysis of the latest data,closely combining the actual situation of our country. Research results provide the important reference for the listed companies and investors, and research results are conducive to the healthy and orderly development of Chinese convertible bonds market. The research content of this paper is divided into seven chapters, the outline of this paper is below:The first chapter presents the significance, outlines, main subjects and the short points of this paper.The second chapter presents the history of the issue influencing factors and announcement effect of convertible bonds at home and abroad.The third chapter expounds important properties of convertible bonds, the basic terms, the difference between ordinary convertible bonds and the separation of trading convertible bonds, advantages and disadvantages of convertible bonds financing. The development of the convertible bond is divided into four stages, which are exploratory stage, starting stage, developmental stage and perfect stage.The forth chapter expounds related theory analysis, put forward assumption and select samples. This paper detailed introduces the market timing theory, the pecking order theory and the backdoor equity financing hypothesis, and analyzes (?)nvertible bonds financing options based on the control gains motivation. This paper put forward three hypotheses:The first, companies tend to choose convertible bonds when the stock is undervalue. The second, high equity concentration companies tend to choose convertible bonds. The third, convertible bonds issue announcement will produce negative market reaction, which is weaker than negative effects produced by public issuance announcement. The paper has selected118companies planned to issue convertible bond from January1,2003to December31,2013, at the same time212companies of putting forward public issuance plan announcement as the compared sample.The fifth chapter adopts descriptive statistics analysis, T Test, Mann Whitney Test univariate analysis and Logit and Probit method to test the issue influencing factors of convertible bonds.The sixth chapter uses the event study method using the market model to estimate the abnormal returns to certify the announcement effects of convertible bonds.At last, this paper accounts for issue announcement effects of convertible bonds combined with the feature of the company.The seven chapter summarizes the research of this paper, put forward policy suggestions and research prospects.In conclusion, this paper finds out:(1) The regression results show that the price-to-book and convertible bond financing tendency has a significantly negative correlation relationship. This suggests that the listed company of our country has "market timing" behavior. Companies tend to issue convertible bonds at the time of the stock price is undervalued. The regression results show that the first big shareholder shareholding and convertible bond financing tendency has a significantly positive correlation relationship. Big shareholders intervene the company’s financing behavior and choose financing methods which can meet the demand of interests.(2)Like the public issuance, the releasing information of convertible bonds in domestic security market has a negative effect on stock price, but the negative effects of convertible bonds announcement in general is weaker than the public issuance.(3)This paper takes financial leverage, growth, the size of the company, monetary fund holdings, profitability, dilutionas as explanatory variables to account for negative price effect produced by issuing convertible bonds plan announcement. The regression analysis finds that the average cumulative excess return has a significant positive correlation relationship with main business revenue growth, the size of the company and cash ratio.Thus it can be seen, the market bullishes on the companies of greater growth, larger size of company and higher cash ratio.The contributions of this paper are:(1) Compared with ordinary convertible bonds, this paper thinks of separation of trading convertible bonds as different types, therefore takes it out from the sample. This can more accurately study the influencing factors and public announcement effect of issuing convertible bonds.(2) This paper takes financial leverage, growth, the size of the company, monetary fund holdings, profitability, dilutionas to account for negative price effect produced by issuing convertible bonds plan announcement. The regression analysis finds that the average cumulative excess return has a significant positive correlation relationship with main business revenue growth, the size of the company.and cash ratio.Thus it can be seen, the market bullishes on the companies of greater growth, larger size of company and higher cash ratio.The results enrich related research.The shortages of this paper are:(1)This article only considers convertible bonds and public offering. Future research should further considers other financing ways,such as corporate bonds, etc.(2)This paper only discusses the share price effect of convertible bonds issue plan announcement, not discusses the share price effect on other events dates.(3)This paper only explains the negative price effect produced by the convertible bonds issue announcement combined with the feature of the company, does not take into account other factors such as market environment, investor sentiment,etc.