The Research On The Relation Of Convertible Bonds, Capital Structure And Corporate Performance

Financing is one of important finance management activities of corporate , and capital market is an important resource channel for corporate to finance. With the development of the securities business, shares or onefold bonds can't meet the need of the investor any longer. One innovation of the financial tools is , to some extend , to integrate the feature of the bonds with that of the shares. This is what-called convertible bond. It has developed for more than 150years since it was issued by New York Erie in 1843 for the first time. It provided the holders with the right with which holders can convert into common shares of the same company in promissory price. Compared with the other types of financing method , it has the advantage of low cost, low diluting speed of operation index and optimize capital structure.In this hundred years, the creation of the types convertible bonds developed unprecedented. This also required the issuing company to make flexible choice and arrangement based on the situation of the capital market and its own finance need. So the convertible bonds has already become a common an mature financial tools in international capital market. But as a comparatively mature financial tool, convertible bonds are still developing in its beginning stage, and fairly immature in our country's securities business. It's necessary to develop convertible bonds, not only for optimize capital market structure but also for more corporate financial resources channel.This thesis is based on the perspective of corporate financing. As a corporate financial resource channel convertible bonds is analyzed and compared with the other channels in this thesis. Four chapters form the thesis. Chapter one is introduction. It illustrates the background and the necessity of this theme , the method of the research , the frame of the theme and innovation . Chapter two theoretically analyzes the conception of convertible bonds. It emphasizes on looking back on the literature about this theme. Because this thesis main study the convertible bonds as a financing method, we must understand its related conception. Chapter three analyzes the relation between convertible bonds and capital structure. It has two-side effect on capital structure, both negative and positive. The emphasis of the thesis consist the chapter four. They analyze the effect of financing by convertible bonds on the company performance. In chapter four I use positive analytical method, I analyze the performance of 30 companies listed on shanghai share market and shenzhen share market who use convertible bonds to finance from 2002 to2004. Especially , I compare the change of seven indexes which can primely represent the corporate performance between two years before issuing and two years after issuing. Finally, I find that , after issuing convertible bonds , the performance of these companies commonly not increase just as expected by theoretical analysis but decreased. The conclusion is the same as that of the foreign expects.