Research On The Impact And Mechanism Of Convertible Bond Issuance On The Cost Of Equity Capital Of Enterprises

Convertible bonds are hybrid financial instruments with the characteristics of bonds and stock options.After the CSRC revised the refinancing rules and issued new rules on reducing shares in 2017,the scale of China’s convertible bond market has rapidly expanded,and convertible bonds have gradually become an important refinancing method.However,due to the imperfect regulatory system and some listed companies blindly follow the refinancing trend,the issuance of convertible bonds has the risk of damaging the value of listed companies and the interests of minority shareholders.In this context,the paper selected all A-share companies listed in Shanghai Stock Exchange and Shenzhen Stock Exchange from 2006 to 2021 as the research objects,and conducted an empirical test on the impact and mechanism of convertible bond issuance on the cost of equity capital of enterprises.Firstly,by analyzing the existing literature,this paper selected RI model to predict earnings per share(EPS),then used the GLS model to calculate the cost of equity capital of sample companies.Secondly,the multi-time point DID model was used to study the impact of convertible bond issuance on the cost of equity capital of enterprises,and the reliability of the regression results was tested by using the instrumental variable method.Thirdly,it explored whether over-investment played a mediating role in the impact of convertible bond issuance on the cost of equity capital of enterprises.Finally,it analyzed the heterogeneity of enterprises with different ownership types,industry characteristics,issuance years,and the duration of convertible bonds.The conclusions of this paper were as follows:Firstly,convertible bond issuance had a significant positive impact on the cost of equity capital of enterprises,and this relationship remained robust after using the instrumental variable method.Secondly,over-investment played a partial intermediary role in the impact path of convertible bond issuance on the cost of equity capital of enterprises.Thirdly,there is no significant difference in the impact of convertible bond issuance on the cost of equity capital of different ownership types.Fourthly,the issuance of convertible bonds significantly reduced the equity capital cost of enterprises in the financial industry,enterprises that issued convertible bonds before 2017,and enterprises with a longer duration of convertible bonds,but significantly increased the equity capital cost of the others.Based on the above conclusions,this paper put forward corresponding suggestions for relevant regulatory authorities,listed companies,and investors.