Equity-like Nature Of Convertible Bond In China Market And Its Influencing Factors

Convertible bond is a kind of special corporate bond issued by the company.It gives the holder the right to convert the bond into common stock of the company at any time within the term specified in the article,and has the dual attributes of equity and debt.The development history of China’s convertible bonds is not long and its scale is small.But in recent years,encouraged by policies,China’s convertible bond market has developed rapidly.But with the scale of convertible bond market increasing year by year,the equity-like characteristics of convertible bond in China are more prominent.Therefore,under such background,this paper studies the influence of corporate fundamentals,market environment and policy factors on the equity-like characteristics of convertible bond stocks through multiple regression model,in order to provide a reference for listed companies to make better use of this refinancing tool and investors’ rational investment.In this paper,147 non-financial convertible bonds issued by Chinese Listed Companies in 2008-2018 are selected as research samples.Firstly,the equity-like nature of convertible bonds is defined,and the equity-like characteristics in China’s convertible bond market are analyzed from multiple perspectives.Secondly,based on the theory of financing preference,this paper analyzes the internal and external factors that may affect the equity-like nature of convertible debt.Thirdly,the paper uses the comprehensive index commonly used in domestic and foreign research to quantitatively measure the strength of equity-like characteristics of convertible bonds issued in China’s capital market.It is found that the equity-like nature of convertible bonds has become even more obvious since 2017.Then this paper put forward several factors that may affect the strength of equity-like nature of China’s convertible bonds.Furthermore,by creating a multiple linear regression model,this article conducts an empirical test on the influencing factors.Finally,by analyzing the design of the terms of the convertible bonds,this paper studies how the company finally achieved the financing purpose through the design of the terms,completing a complete chain analysis from the cause of the issue to the result of the issue.Studies show that the equity-like nature of China’s convertible debt are indeed relatively strong,and it has significant correlations with the company’s cash surplus and policy factors.The higher the company’s financial slack,the weaker the equity-like nature of the convertible bonds.After the new regulations on refinancing issued in 2017,the equity-like nature of convertible bonds issued by listed companies further strengthened.The correlation with other hypothetical factors including the company’s growth,debt repayment ability,tax burden level and other indicators is not large,which indicates that China’s convertible bond market is still immature and is greatly affected by policies.The issuer and investor both lack a rational understanding of the financing tool.In the end,based on the results of the above research,this paper offers several proposals for the supervisor.