Research On The Motivation And Effect Of Controlling Shareholders Issuing Exchangeable Bonds

Exchangeable bond is a kind of embedded option,the underlying assets of which are other companies’ shares held by the issuer.The concept of exchangeable bond was first introduced into China in order to alleviate the impact on the stock market caused by the reduction of non-tradable shares.Since it first appeared in Chinese capital market in 2013,exchangeable bonds are widely used in all aspects of capital operation This paper mainly discusses the following two questions around the exchangeable bonds: why do the issuers prefer the exchangeable bonds?The issuance of exchangeable bonds will not directly affect the performance of the underlying company,but will the signal transmitted by the relevant announcement affect its stock price?Existing literature research on exchangeable bonds focuses on the issuance motives,issuance effects and terms setting.Regarding the risk of the issuance of exchangeable bonds,the financial impact on the issuer and the impact of subsequent announcements on the stock price of the underlying company are seldom studied and controversial in China.Based on information asymmetry,financing priority and signal transmission,this paper firstly defines the relevant concepts of exchangeable bonds and sorts out the existing research result.In the market with asymmetric information,the issuing of exchangeable bonds by shareholde rs of listed companies will send different signals to the market,and the market will have different interpretations of the issuing motivation through the issuing timing and term design,thus affecting the stock price of the underlying company.On this bas is,this paper combs and summarizes the characteristics of exchangeable bonds in the eight years of China’s market development.Based on the above theory and current situation analysis,this paper selects the two issuances of exchangeable bonds by Yankuang Group in 2017 as the case study objects.It analyzes the motivations of these two issuances from the perspectives of issuing timing,term design and capital operation,with the supply-side reform of the coal industry as the background.This paper also analyzes the issuing effect of exchangeable bonds from two aspects.On the one hand,it analyzes the impact of issuing exchangeable bonds on issuers by comparing the financial situation of issuers before and after the issuance.On the other hand,we use the ev ent study method to track the whole life cycle of exchangeable bonds from issuance plan to delisting,and study the impact of issuance announcement,conversion date and equity change announcement on the underlying company’s stock price.This paper draws the following conclusions: 1)issuing exchangeable bonds can satisfy multiple motives such as financing arbitrage at the same time;2)exchangeable bonds are conducive to broaden the financing channels of non-listed companies and optimize their financial si tuation;3)the announcement effect of exchangeable bonds is affected by their issuing motives.The market will interpret the issuing motivation of exchangeable bonds through the terms and conditions of exchangeable bonds,so as to affect the stock price of the underlying company.Finally,this paper puts forward suggestions to issuers,investors and regulators from the perspectives of grasping the timing of issuance,improving risk awareness and promoting the diversified application of bonds.