The Announcement Effect Of Exchangeable Bonds In China

The exchangeable corporate bonds have been so popular since entering China.Because the time is short,there are few empirical researches on the announcement effect of exchangeable bonds in China.Based on the event study method,the article carries the empirical study on the announcement effect of the exchangeable bonds which their target company's stocks are issued in China's A-share stock market.The results show that there is a negative influence on the market when the announcement announced.Its influence on the Shanghai A-shares and the Shenzhen A-shares is almost the same.On the six days before the event day,the abnormal return is significantly positive for both the two markets,while it's negative on most of the other days,and is not significant.It shows that there may exist news leaked in advance.The news makes a positive influence to stock price.While as time goes by,the positive effect is flattened by the negative effect which is not so significant.There is a pessimistic mood toward the market.Till the end of the window,the decline of cumulative abnormal return in Ashare market is eased,with CAR in Shanghai A-shares negative and CAR in Shenzhen A-shares back to zero.It shows that the announcement of exchangeable bonds makes the CAR decreasing dure long in China A-share market.The market efficiency also needs further enhance,but the Shenzhen A-share market is more effective than Shanghai A-share market.In addition,this article studies the influence of the announcement effect of exchangeable bonds by multiple linear regression analysis.The result shows that the proportion of company's fixed assets,market to book ratio,equity concentration,company's age,maturity of exchangeable bond and credit rating of issuing company are main influence factors,and the results are explained.In the end,the paper makes the summary and put forward the policy suggestions according to the results.It indicates that China should speed up the improvement of the financial system,strengthen the market efficiency,further refine trading rules,create rich financial derivatives for people to use,perfect the legal laws and regulations,focus on the regulatory,and standardize China's financial market,so it can develop toward a good direction.