Study Of The Announcement Effects Of China’s Convertible Bonds Issuing

Convertible bonds as a financial derivative have the dual natures of bond and stock, it has won the favor of the majority of the issuing companies and investors in the capital markets with its unique attraction. Convertible bonds in foreign countries have more than160years of history. Especially after seven decades of the twentieth century, with the big wave of global financial innovation, convertible bonds develop-ed rapidly and has gradually become an important financial investment tool in the long-term international capital market. In the1990s, Shanghai and Shenzhen Stock Exchange introduced convertible bonds, but convertible bond market developed very slowly. Although the convertible bonds developed very rapidly in recent years, but the majority of investors still remains at a relatively early stage to the concept of convertible bonds as a financial derivative, the majority of the convertible bond issuers on the affect of using convertible bonds to finance to its financial condition and the value of the company still know little. Although a lot of schol-ars have carried out a large number of empirical studies on the announcement effe-ct of convertible bond, but there is not a conclusion.After an extensive literature research read and my serious thinking, I collected a lot of sample data and developed an innovative way of dividing the convertible bond samples into two parts with the split share structure reform as a point. With the event study methodology. I study the announcement effect of the convertible bonds before and after reforms. The study shows that the announcement effe-ct of convertible bonds before the split share structure reform is negative, but after the split share structure reform comes to the opposite positive. I think this conclusion has a very positive impact on the convertible bond market of our country.The basic framework of this paper:The first part is the introduction and the research backgrounds, significance, innovations and inadequacies. The second part is literature review. In this part I firstly introduce the main models that scholars of domestic and international use to study the announcement effect of convertible bonds. In this part Ⅰ also introduce the domestic and international literatures on the convertible bonds announcement effect. The third part of this paper is an overview of the convertible bonds. In this part Ⅰ will introduce the origin, nature as well as some key terms of convertible bonds, at last Ⅰ will have a brief review of the issuance history of China’s convertible bonds. At part Ⅳ of this paper, the event study methodology will be described firstly, with this method the announcement of convertible bonds is studied before and after the split share structure reform, and ultimately we come to the conclusion of that announcement effect of convertible bonds before and after the split share structure reform is opposite. At the last part of the article we resolve differences of the announcement effect of convertible bonds before and after the split share structure reform mainly from two aspects of the quantitative and qualitative.