A Study On Convertible Bond Financing Of China

Convertible bonds means bonds are issued according to legal procedure and can convert into equity of corporate under specify conditions in a period. As mixed derivatives, convertible bonds have the characteristics of creditors and equity. And it is widely welcomed by investors for its dual function of financing and hedge. Nowadays convertible bonds become an important component part of financial markets.Compare to lots of foreign theoretical papers and empirical researches, the studies about the announcement effect of convertible bonds issuing in China are at the initial stage, especially after all circulate. This paper use a group of convertible bonds issued by Chinese companies as the sample. Then an empirical study is started with the values before and after all circulates, which are influenced by the announcement effect of convertible bonds. At last, several significant conclusions and corresponding tactics are given.This paper is constructed according to the empirical study pattern. There are four sections of this paper: section 1 (chapter 0) is the foreword; section 2 (chapter1) is the literature review; section 3 (chapter 2-3) is the empirical study; section 4 (chapter 4) is the research conclusion. The following is the main content and viewpoint of each sector:Section 1, mainly describes the research background, the purpose and the framework of article.Section 2, gives a synthesis of relative theoretical models and empirical results. First of all, this paper divides the hypotheses of the announcement effect into three categories; secondly, several important papers are emphatically introduced by using the above hypotheses and a comparison is made according to the empirical result of different countries; thirdly, this paper introduces some papers about announcement effect researching in Chinese stock market.Section 3, is empirical study. This paper choose 41 samples that Chinese listed companies issue convertibles on native market from total samples and give an descriptive statistic about their characters. Then an event-study method is used to study announcement effect of Chinese convertible bonds issuing. The results show that the two-day cumulative abnormal return (CAR) before all circulate is negative and the CAR after All Circulate is positive. The results during other three windows, (-1,1),(-5,5),(-10,10)are also analyzed in the article. In order to find the affecting factors, a regression model is founded. Finally, several significant conclusions are drawn from the results.Section 4, is main conclusions and corresponding tactics.The following are the innovation and contribution: Firstly, this paper study the announcement effect of Chinese convertible bonds issuing after all circulate for the first time; secondly, this paper selects a factor which accords with the characteristics of China's capital market as the substituted variable; thirdly, after considering both of the Black-Scholes Option Pricing Model and Barlacu (2000) Empirical research, this paper introduces the sensitivity of indicators Delta in order to measure the value of shares in the convertible bonds.