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

Convertible bonds means bonds are convertible, at the holder's option, into shares of common stock of the same corporation. It is a necessary part of the securities market. Convertible bonds play the important role in the flourish of the securities market. Through the study of announcement effects of convertible bonds, we could understand the reaction of the convertible bonds market. We could perfect and develop the convertible bonds market.This study investigates the announcement effects of offerings of convertible bonds using data for the Chinese market. We use the announcements of convertible bonds that issued from January 2000 to December 2003 by Chinese companies. The sample includes two parts, one part is the 81 convertible bonds which broad pass the offering advice (CBP), and the other part is the 23 convertible bonds that had offered (CBo). The announcement effect of CBo is the paper's main investigative object. The event study analysis shows that announcement effects of CBP have a significant negative share market response. It has a cumulative abnormal return of -0.36% over the period [0,1]. And the analysis shows that announcement effects of CBo have a significant positive share marker response. It has a cumulative abnormal return of 0.39% over the period [0,1]. The cross sectional results of CBP show those growth opportunities is positively associated with firm value. And the cross sectional of CBo results show that debt ratio is positively associated with firm value. The firm-specific news is negatively associated with firm value. The performance of CBo is similar to the results for Dutch market. But factor of effect is difference to the Dutch market. Compare with re-issuing new shares and rationing shares, we find investor prefer convertible bonds.At the end of the paper, we give some pieces of advice of convertible bonds market in 3 aspects. The 3 aspects are country, corporation and investor.The paper included 5 parts: introduction, summarize, Chinese convertible bonds market, an empirical analysis and advice.