Announcement Effects Of Convertible Bonds: An Empirical Analysis For Chinese Market

Convertible bond is a financing tool, whose character is between the bond and stock. Have been developed more than 100 years in several regions such as Europe, America and Japan, the market of convertible bonds has come to be an important part of international capital market. Upon pronouncing to offer convertible bonds, the price of target stock usually fluctuates, which is named as announcement effects.About the market reaction to the seasoned offerings, a lot of researches have been carried through by scholars and several theories have been brought up, the article summarize the theories at first. Then an empirical study is given, which is on the cumulative abnormal returns(CAR) of target stocks using a sample of 28 Chinese convertible bond offerings, the results show that the two-day cumulative abnormal return is negative.The CAR results during other three windows, (-20,+20), (-10,+10) and (-5,+5) are also analyzed in the article. In order to find the affecting factors, a regression model is founded which is about the relationship between CAR(-1,0) , issue-scale, issue-mat, company-value, increasing index and equity debt ratio, and several significant conclusions is also drawn from the results. At last, the deficiency of Chinese market of convertible bonds is analyzed, and the corresponding tactics is given.