Empirical Study On Motivations Of Issuing Convertible Bonds In Listed Companies In China

Convertible bonds, a financing instrument containing both fixed-income and equity characteristics, has become one of the major re-financing instruments of listed companies of China. Convertible bonds market is not mature in China, and it is often occurred that listed companies blindly issue convertible bonds. Till now, the domestic study on motivations of convertible bonds issuing is rare. So investigating on the issuing convertible bonds motivations of China's listed companies is very beneficial to deepen their understanding, to help them utilize it more efficiently and to promote and consummate our convertible bonds market.Based on the perspective of financing costs, this article tries to build an index system by considering impacts on decision-making from both the internal financial characteristics and the external macro-environmental factors. Under the two-step decision-making model in the financing framework, based on the company data from three main types: convertible bonds, stocks and debts, we test significant differences via single variable analysis of variables of samples from three types above and further study the variables'impact on financing decisions using logistic regression analysis. We try to find out whether China's listed companies issue convertible bonds to be used for "delayed equity" or "sweetened debts", to find out the real motivations of listed companies issuing convertible bonds, and to find out whether it is matching on financing acts and issuing goal in China's listed companies when issuing convertible bonds.Through study on mentioned above, we found that forcing to issue convertible bonds of China's listed companies is due to the motivation of"delayed equity". In this paper, we analyze the causes of the motivation via the perspective of the theory of private benefit of control and find out that the listed companies obtain"delayed equity"financing by convertible bonds for getting more private benefit of control. And then we give a further interpretation of motivation causes with combining the characteristics of China's capital market. Finally, we give advice on how to develop convertible bonds market for government and how to better utilize convertible bonds for listed company.