The Research On The Effect Of Downward Correction Of Convertible Bonds To Share Price Announcement

In the context of strengthening financial supervision in China in recent years,China Securities Regulatory Commission issued new regulations on refinancing in 2017,restricting traditional domestic financing methods such as additional issuance and rights offering.Convertible bonds have gradually become an important channel for refinancing of listed companies.In the classical literature of convertible bonds,it mainly focuses on the effect of pricing issuance and redemption announcement,and there are few literatures on the research of downward revision clauses.As a special term in China,the study of its announcement effect and related influencing factors is not only of theoretical significance to enrich the research content of convertible bonds in China,but also of practical significance to help issuers and investors make reasonable decisions.This thesis adopts the method of combining empirical research and case analysis.Firstly,select the companies that use the revised terms among the main issuers of convertible bonds in China from January 1,2008 to June 28,2021 as the research sample,use the event research method as the analysis framework,and use the market model,FamaFrench three factor model,Carhart four factor model and Fama-French five factor model to estimate the expected rate of return and calculate the corresponding cumulative abnormal rate of return(CAR).In order to explore the existence of the downward correction conversion share price announcement effect of the sample companies,randomly move the event date forward or backward for several days as the virtual event date,and use PSM to match the most similar control group as the virtual experimental group for placebo test respectively.At the same time,modify the estimation window to enhance the reliability of the empirical results.Secondly,in order to further analyze the influencing factors of announcement effect,this thesis selects the car value with window period(-7,7)calculated by Fama-French three factor model as the explanatory variable,and selects the company’s total assets,financial pressure relief degree,current ratio,downward correction range and maturity of the transfer price are used as explanatory variables for multiple regression analysis,and the robust standard error is used to eliminate heteroscedasticity.At the same time,the robustness test is carried out by modifying the key explanatory variables and the explained variables.In terms of case analysis,this thesis uses relevant cases to verify the existence of the above announcement effect and the applicability of significant influencing factors.Through the research,the main findings of this thesis are as follows.First,from the perspective of the existence of announcement effect,the empirical results of the multi factor model are relatively consistent,that is,some windows show significant positive returns,and the results support the boot landing theory.Second,from the influencing factors of announcement effect,the current ratio and maturity have a significant negative correlation with the cumulative abnormal return of positive shares,and the degree of financial pressure relief has a significant positive impact on the abnormal return of shares.This thesis enriches the relevant research on the downward revision clauses of convertible bonds,and puts forward the following suggestions from different angles from the conclusion.First,when making the issuance decision,the issuer should make a rational analysis and judgment on the internal and external environment of the company,reasonably design the contents of various clauses and balance the interests of all parties.Second,investors should pay more attention to the convertible bonds that have triggered the downward amendment clause and their corresponding positive shares have been in a downturn in the near future.