Convertible Bond Financing Selection In China And The Restrict Of Ineffective Investment

With the rapid economic development, China’s increasinglyserious phenomenon ineffective investment, investment efficiencyis worrying. Over-investment and under-investment is China’slisted companies in the investment process problems to be solved.Based on the existing literature on the further study of theconvertible bonds as now one of the most important governance roleof financing for non-business efficiency investments.Theoretically, convertible debt financing with lower externalfinancing costs and improve corporate governance performance ofa specific type of role. First, explore and summarize theconvertible bonds to reduce external financing costs and improvethe efficiency of a particular type of non-investment mechanismsand pathways theoretically. On the basis of our convertible debtfinancing choice behavior and the effect of a comprehensive studyand characterization. The study found:Our convertible debt financing company characterized byhaving a high debt ratio, higher growth, lower operating cashacquisition capability, high free cash flow, the larger the size ofassets. Theoretically, convertible bonds financing the company hasa "small-scale, high financial leverage, high growth, high-risk andhigher free cash flow" feature in our convertible debt financing businesses partially reflected, indicating that the choice of listedcompanies when convertible debt financing, taking into account therisk of financial distress, agency issues and alternative risk assetsmay be caused by asymmetric information, adverse selection costand risk estimation difficulties and other factors.Convertible bonds can curb excessive investment behavior, andits lack of investment but has a very good improvement. This showsthat the role of convertible bonds do have a two-way investmentineffective governance, in addition, this paper also designed togovern the terms of the convertible bonds inefficient investmenteffects of empirical research. Studies have shown that the termsof the redemption of convertible bonds in the short termover-investment has a certain extent, but its impact on the lackof investment is not significant, putable certain governance rolefor both over-investment and under-investment. This means thatmoderate liberalization in maintaining the necessary regulatorybasis for the company policy to limit the use of convertible bondfinancing, and actively develop the bond market, listed companiesin China will help to improve the overall efficiency of investment.