| Financing is an important decision-making component for enterprise management.Good financing channels can support the operation of enterprises developments sustainable and stable.In order to meet the different financing purposes of the different enterprises and make up for the shortcomings of traditional financing methods,the convertible bonds came into being.As a hybrid financing channel which combines the character of share,ordinary bond and option,convertible bond has gradually become an important financing means of trading enterprise with its flexibility of terms and low interest rate.With the advantange of complexity,issuing convertible bonds can not only meet the financing needs,but also adjust the structure of the company.Therefore convertible bonds can meet the motivation of shareholders and managers to maximize the benefit of the enterprise.In order to regulate the time of interval between the application of additional issuance of shares and other publicly issued stocks strictly,the CSRC relased a newpolicies called "Detailed Rules for the Implementation of Private Issuance of Stocks by Listed Companies" in February 2017.Convertible bonds are not included in the reform of the rules as the rules specifically point out,resulting in the number of convertible bonds issuance achieved unprecedented leap-forward immediately in the year.The question of whether convertible bond financing has a positive effect on business performance has also attracted the attention of business managers and investors.Tongrentang Chinese Medicine Co.,Ltd.was selected as a case of study in this paper.Tongrentang is a listed company that take manufacturing,processing,marketing of traditional Chinese medicine as the main industry.Tongrentang Chinese Medicine Co.,Ltd.issued 1.205 billion yuan of convertible bonds publicly on December 3,2012.The funds are mainly used into the construction of Daxing production base.For the structure of the paper,firstly we introduces the basic theory and Research achievements of convertible bonds as a theoretical to support our study about the case.Then we tracked and analyzed the whole process of the issuance of convertible bonds,including the changes of financial and market performance after the issuance of convertible bonds.The research on Tongrentang’s before issuing convertible bonds mainly focuses on the motive of issuing and the comparison of different financing cost in the different conversion time,analyzed the financial situation that led to the issuance of convertible bonds,and calculates the cost of the issuance of convertible bonds.The research on performance is mainly from two aspects: financial performance and market performance.In the aspect of financial performance,firstly,we made a simple analysis of the basic financial situation that impacted by the issuance of the convertible bonds,then we use the method of the EVA to analyze the excess income and cumulative excess income;for market performance,we mainly uses the event study method to explore the market reaction after the issuance of convertible bonds,and analyzed the changing trend.Finally,we summarized the impact on the performance of the case company after the convertible bond issuance.The research shows that the special characters of convertible bonds can make enterprises get a lot of liquidity while avoiding high financing costs,reduce capital pressure and financial risks,adjust the capital structure of enterprises,and delay the speed of equity dilution.From the market performance point of view,the CAR of the company accumulated to negative,resulting in a certain amount of wealth losses,but AR are obvious after the announcement of convertible bond.Therefore,the issue of convertible bonds in the short term have a positive impact on company’s operating performance,but the positive impact will have a short delay.In addition,this positive effect is closely related to the timing of issuance,size,reasonable clause design and timing of redemption.This paper hopes to enrich the relevant theory and provide a reference for companies that considering financing by convertible bonds.so that enterprises can chose the method of financing more flexible and active,and in the same time promoting the development of China’s capital market healthy and orderly. |
