Empirical Study On The Announcement Effect Of Convertible Bonds In China

Convertible bonds mean bonds are convertible, at the holder's option, into shares of common stock of the same corporation. Convertible bonds grow very rapidly and become an important means of outer financing. Through the study of announcement effects of convertible bonds on the day of announcing convertible bond prospectus, we could understand the reaction of the stock market. So we can perfect and develop the capital market in our country.In the empirical research, we use 42 the listed companies which have issued convertible bonds from January 2000 to February 2007 as our research samples. We analyze the stock price fluctuation around the day of announcing convertible bond prospectus using the standard event study method. We find the issue announcement of convertible bonds cause the stock price to rise on a certain extent. The abnormal return of day+1 is significant in 5% significant lever. The (0,1)cumulative abnormal return is 0.457% , but it is not significant. We separate the whole samples into two sub-samples according if the companies have done the reform of non-tradable shares. Compared to the common convertible bonds, we study the announcement effects of the discretely trading convertible bonds.In the regression models, on the basis of foreign research and also considering the practical conditions of Chinese market, we bring forward the model contain the corporate information as independents, the(0,1)cumulative abnormal returns as the dependent. We found it is positive relative to debt/asset ratio, total asset of the companies, the growth of the companies, negatively relative to convertible's maturity, the degree of dilution, the scale of trade stocks. And if the companies have done the reform of non-tradable shares, it has positive effects.