The Announcement Effect And The Influencing Factors Of RMB Off-Shore Market In H.K.

In June2007, the people’s bank of China, the national development and reform commission jointly formulated " Interim Measures about Domestic financial institutions issue renminbi bonds in Hong Kong special administrative region ",and promulgated it.The interim measures marks the rise of RMB bonds in Hong Kong. Then in July2007, China development bank released the first offshore RMB bonds in Hong Kong, issue size is500million, coupon rate is0.03%, Maturity is two years. The success of the bonds issued opens the market of RMB bonds in H.K... After about five years, renminbi bonds marks in Hong Kong has developed very well. With the rise of RMB bonds in Hong Kong market, the research of RMB bonds in Hong Kong constantly emerg, however, most paper about the renminbi bonds market are qualitative study, and don’t have quantitative study right now. This paper is the first quantitative study about RMB bonds market, we use event study method to research the market, and this is the first innovation points. The authors collected and compiled related information of all the issuance of RMB bonds in Hong Kong by the end of February2012, such as the company issuing bonds, issue size, coupon rate, bonds term, announcement, suggestion announcement date and finished announcement date. And the collect data eventually get the proof of the Hong Kong monetary authority, so data of this paper is reliable; this is the second innovation points.There are128bonds issued by102companies, including121"snack debt" and seven synthesis RMB bonds, eliminated5issues by the Chinese government,3issues by International organizations,15bonds issued by7unlisted banks,22bonds issued by21unlisted companies, the rest of the83bonds are the research objects, we will rearch the Hong Kong offshore renminbi bonds market useing them.In this paper, we use the event study to research the announcement effects of total sample under fourth methods, that is mean adjusted model, market adjusted and original model method. The empirical results show that, in our events window, the issuances of RMB bonds in Hong Kong have significant negative effect on the stock price of the companies, that is say the issue of offshore RMB bonds will decrease shareholder wealth. This effect is equal to announcement effects in the domestic equity financing, less than the announcement effect of convertible bonds and the company bonds. Further, we study the influence factors of the announcement effect, the results of cross regression showed that the cumulative average abnormal returns is positively related to the size of the company, credit rating,is negatively related to the maturity, and the relative bond issue size, company’s fixed assets ratio, leverage and growth have no significant correlation. Here we also get a surprising, the market model although there are many advantages, mean adjusted have many advantages market model don’t have, so mean adjusted in even study is more suitable in sometimes. In this way, Adjusted mean more suitable for this study, so this paper chooses mean adjusted as the principal model.