Study On Some Problems About Convertible Bond Financing For Listed Companies

Since convertible bond have double identities of both bond and equity, it is a significant way of refinancing for companies. With a history of over 150 years abroad, convertible bond has become a fairly mature and common financing tool in the well-developed security market. As for the security market in China, convertible bond has never drawn enough attention since it was first issued experimentally more than ten years ago as a new financing tool for listed companies. It has been getting better since 2001 with an increasing number of listed companies preferring convertible bond when financing, which leads Chinese convertible bond market to both challenges and opportunities of development.In our country, companies paid more attention to equity financing than to debt financing in the past time, so that the debt market didn't well developed. Listed companies using CB financing can help to resolve the problems of exorbitant equity financing scale, few security types and slow financing innovation in this market. This article stands the view of enterprises' financing, analyzes the convertible bonds as one of the enterprises' financing channels. It concludes that CB financing can decrease many types of equity-related and debt-related costs in firm's external financing contrasting with debt and equity financing, so it has obvious advantages for corporate financing.Firstly, the thesis analyzes CB's property and inbeing using economics theories, and summarizes and contrasts the history and status in quo of CB financing for China and other developed countries. It paves way for next research. Secondly, by using a simulative case, the thesis quantificationally analyzes how CB financing affects a public company's capital structure. In this case, we lay stress on the basic process of its dilution, tax shield and financial distress and the differences with debt and equity financing. Based on it, we develop our research. On the basis of deeply comprehending, the thesis considers the internal cause of CB financing is to decrease many types of financing costs in the status of information asymmetry. So, creatively and systematically, we divide them into agency costs, under-pricing and financial distress costs and risk uncertainty costs. By using two models and existing evidences, the thesis then discusses the relative advantages and appropriate firm's characteristics of CB financing. Finally, It gives a macro-analysis of the flaws of the Chinese CB financing, and makes suggestions about how to improve and perfect Chinese CB financing.