| Though there was a short time since the convertible bond as a new kind of financial instrument was introduced in China securities market, it attracted more and more attention from the investors and the listed companies. Especially in the past two years, many listed companies have chosen to use the convertible bond as an instrument of raising funds again from the securities market. At the same time, investors found it worthwhile to buy it because its true value was depreciated, then many buyers spend their money buying it. Last year, the China Merchants Bank proposed a 10 billion refunding plan by the means of convertible bonds. But this plan was so unwelcome by investors that they tried to resist it. And many scholars, reporters and investors expressed their views on it.In the past time, most listed companies in China either re-issued shares toward both their present shareholders and other investors at the basis of current share prices or re-issued shares toward their shareholders only at a relative low price. Now more and more companies shifted to issue convertible bonds to re-raise fund from the securities market. So what is the reason for this phenomenon? And is there any mistake that these companies made by using this kind of financial instrument? In this thesis, the first chapter will give answers to the above questions by combining the relative mature research fruit of foreign scholars and the special conditions of China securities market. In addition, the event that the China Merchants Bank issued 10 billion convertible bonds was analyzed to prove the above theoretic analysis. First of all, issuing convertible bonds can be considered as a delayed equity. Secondly, it can effectively overcome the moral hazard such as "asset substitution" in the sole equity financing and "investment shortage" in the sole debt financing. Thus convertible bonds can play an important role in the corporate governance structure. In order to prove that :(1) the mixed financing of equity and debt is a more efficient financing method than pure-equity or pure-debt financing. (2) Convertible debt financing method is as efficient or more efficient than that of mixed financing of equity and debt, one mathematic model was introduced. Thirdly, comparing with the traditional debt financing, the convertible bond can only bear relatively low coupon; comparing with the equity financing, the convertible bond owns the "tax shield" and the relatively slow "dilution effect". Therefore if one company chooses appropriate investment project, it will increase the earning per share. Last but not the least, the convertible bond is a completely new financing method for those developing but high-risk companies. Thus, it becomes available for those companies to raise funds to invest in high-risk project at a comparatively low cost. But in China, companies mainly take the convertible bond as the alternative financing method. Besides the above reasons, in fact, listed companies in China pay more attention to the relatively lower financing cost and higher issuing price compared to the other two re-funding methods. Additionally, the separation of public shares and state-owned shares that is commonly called "double way circulation" and state shareholders taking a priority position in corporate governance structure determined that no matter which kind of method was adopted to re-raise fund from the securities market, public shareholders' interest will be damaged but state shareholders will benefit from it. There are the following two mistakes that the Chinese listed companies had made: first, only if they meet the requirement of issuing convertible bonds that the CSRC regulated, they will try to submit their issuing applications to the CSRC. Second, it is not appropriate for listed companies to launch convertible bonds when the market is in bear market.At the end of the first chapter, we take the China Merchants Bank for instance to prove the above theoretic analysis. From this example, we have drawn a conclusion... |
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