Empirical Study On The Influence Of Conversion Of Convertible Bond On Corporate Performance

Convertible bond has been playing a more and more important role in China's stock market since 1998 and it becomes one of the listed companies'important financing tools. In particularly, financial crisis broke out all over the world and the major financial markets in the world were severely damaged, so did the capital and financial markets in China. However, the convertible bond had withstood the great turmoil test because of its "no ceiling and under the remedial" in nature, and it played a "safe haven" role in the financial crisis, so it is more favored by the listed companies. More Empirical researches hold the view that corporate performance declined after the issuance of convertible bond, then the performance after the conversion of convertible bond is a problem that deserves attention.The main research method is the combination of normative research and positive research. Firstly, we introduce the system and basic situations of converting debt, and then we make a systematic analysis based on capital structure theory and corporate governance theory and risk management theory, which let us have a more comprehensive understanding about conversion of convertible bond. In the Empirical analysis, we select 33 convertible bonds as a sample that are issued by non-financial sectors from 2002 to 2009 and the convertible rate is more than 50% within a year, then we use the principal component analysis to calculate the comprehensive value of corporate performance for three years during pre-and post conversion of convertible bond. The next we should do is to use Wilcox on signed-rank test to compare the comprehensive value of the three years from the view of global aspect and industrial properties. The results show that:(1) On the whole, the corporate performance has a significant change after the conversion of convertible bond and it shows an upward trend, so we think that the conversion of convertible bond could improve corporate performance, which is consistent with the theoretical analysis; (2) From the point of view of the industrial nature, we could find that the company performance of the secondary industry has a clear upward trend, while the company performance of the third industry is almost unchanged after the conversion of convertible bond. We think the result is related to the firm size and the little number of samples.The research we have done enriches the empirical research on the relationship between conversion of convertible bond and corporate performance. It makes the issuers of convertible bonds fully realized the changes of company performance after the conversion of convertible bond. It also could encourage the issuers to carry out a proactive policy to promote conversion of convertible bond successfully which could help them to get better performance of the company.