The Announcement Effect Of Convertible Bonds In Chinese Market: Based On The Terms Design

Convertible bonds, as a new refinancing tool in our capital market, are more and more welcomed by listed companies in China. Convertible bonds have both equity nature and debt nature. The equity financing has obviously negative effect in the secondary market and the debt financing has positive effect. What is the announcement effect of convertible bonds financing? And what are the factors? What is the difference of separate convertible bonds and commom convertible bonds? How about the announcement effect of separate convertible bonds? The dissertation will focus on those topics.By using the theoretical analysis and empirical analysis, we review the foreign and domestic surveys about the announcement effect. In the empirical research, we choose the 39 listed companies which have issued convertible bonds as our sample. The range is 2000 to 2006. We find that the cumulative average abnormal return in (-1, 0) is -0.80%, and the issuing companies'abnormal return are all decreasing. Fatherly, the cross section results show that, the announcement effect of convertible bonds is negative related with the issuing size, delta and maturity; the announcement effect of convertible bonds is positive related with the initial conversion price and redeemable terms. We continue to investigate the announcement effect of the 5 separate convertible bonds which are existing in Chinese capital market. We find that the cumulative average abnormal return in (-1, 0) is 0.36%, their announcement effect is not obvious as the common convertible bonds. At last, we conclude our research and give some suggestion about the terms design. We hope that this dissertation can give some reference for both the investors and listed companies.