Analysis On The Motivation And Influence Of Ningbo Orient Wires & Cables CO.,LTD Early Redemption Of Convertible Bonds

As a compound financial instrument,convertible bonds have the nature of debt,equity and options at the same time.For the issuing companies,convertible bonds are an important channel for refinancing because of their lower cost of financing.For investors,convertible bonds can not only enjoy interest income but also choose to convert into shares,making investment more flexible.In the past two years,the issuance scale of convertible bonds has shown a rapid upward trend.Financial products such as convertible bonds have also attracted the attention of companies and market investors.However,there have also been a large number of early redemptions in the market.In order to ensure the future high-quality development of the convertible bonds market and protect the legitimate rights and interests of investors,this phenomenon must arouse the attention and vigilance of the market.As a leading enterprise in the industry,Ningbo Orient Wires & Cables CO.,LTD announced the early redemption of all convertible bonds only one year after issuing Donglan Convertible Bonds.Compared with other similar products in the market at the same time,the duration is quite short and has a certain representation.This paper firstly analyzes the motivation of early redemption behavior of Ningbo Orient Wires& Cables CO.,LTD from the perspective of industry background,corporate financial situation and financing cost,so as to understand the relevant operating conditions and decision-making purpose of the company.Then,the impact analysis and risk-return analysis of the early redemption behavior of Donglan Convertible Bonds are carried out.In this paper,the B-S model is used to calculate and find that the early redemption behavior will result in the decline of the theoretical value of the Donglan Convertible Bonds,but at the same time,because the Donglan Convertible bonds has been undervalued in the market before redemption,the early redemption behavior will lead to the increase of the market price of the Donglan Convertible bonds,and the degree of deviation from the theoretical value will be reduced.As for the market reaction,this paper uses the event study method to analyze the influence of early redemption behavior on the stock price of the company,and finds that early redemption behavior stimulates investors’ confidence and investment enthusiasm,playing a boosting effect on the stock price of Ningbo Orient Wires & Cables CO.,LTD.In addition,through the longitudinal comparison of the relevant business indicators and data before and after the redemption of the company,it is concluded that the early redemption of the company has indeed achieved the purpose of improving the basic financial condition of the company.To sum up,the paper draws the following conclusions.The early redemption of convertible bonds by Ningbo Orient Wires & Cables CO.,LTD has produced certain positive effects on the company’s financial situation,ending the financing process early and increasing the company’s capital,easing the company’s debt pressure and resisting industry uncertainties,which is in line with the company’s current development situation.For investors,they should actively pay attention to the company’s dynamics,make optimal choices based on changes in the stock market and convertible bonds market,maximize returns,and be alert to the operational risk of failing to convert shares when they expire.The early redemption of Donglan Convertible Bonds achieved low-cost financing for the company with balancing the interests of investors.The experience of early redemption of the convertible bonds are of reference significance for other issuers in the market,so that China’s convertible bonds market can achieve benign and rapid development in the future.