The Effect Of The Issuance Of Convertible Bonds And The Impact On Corporate Performance

Convertible bond was welcomed worldwide ever since its emergence170years before, as it’s a kind of combinative investment tool of equity and credit. Convertible bond was born in the United States and has formed mature market, with its study reached utmost level. But the domestic study on convertible bond is comparatively fewer, most of which mainly focus on pricing model and issuance terms etc. Convertible bond is as important as allotment of shares and increasing issues as a refinancing tool. Its announcement effect and impact on company performance is worth our studying.The convertible bonds issued on China security market are selected as empirical study sample, the result showing that the stock abnormal return is negative and outstanding. Then conducts regression analysis on several factors, the result showing abnormal return has positive correlation with company size, issue scale of convertible bond and growth rate of main business income, and negative correlation with company’s debt-to-asset ratio. The final part is the study on comparative change of return of equity in3years to show the effect of convertible bond issuance on company performance.Structure:Introduction part mainly introduces background and significance of this subject, some important concepts, research thought and structure. Chapter one is literature overview, which encompasses the relative theory and empirical studies on the announcement effect of convertible bond so as to show the theory evolution history and development status quo. Chapter two and chapter three are the main body of this paper. Chapter two conducts single variable significance testing and multi variables regression analysis on announcement effect. Chapter three researches the long term impact of convertible bond issuance on company performance, which choosing the return of equity as the proxy variable to conduct vertical and horizontal test. Chapter four is the conclusion and suggestions, which first summarizes the research results of this thesis, then points out the problems on China convertible bonds market and gives some suggestions to speed up and improve the development of our country’s convertible bonds market.