A Study On The Terms And Interests Of Convertible Bonds In China

After more than20years of development, today, there are88convertible bonds in China, ever since the first one issued in1991. As stock market declined with the economic crisis in2008, Chinese securities regulators have been controlling IPO, and meanwhile encouraging listed companies to finance through issuance of bonds. Among the listed companies, which need equity financing, convertible bonds are popular because of the characteristics of both option and claims.Thisarticle is to study the distinctness of equity characteristic reflected by theterms of convertible bonds under the above background. Also, validation of the equity characteristic is conducted with the circumstance of convertible bonds-to-equity.The convertible bonds issued between2004and the first half of2012in China were selected as the study objects. First, the equity characteristic of convertible bonds are taken for comprehensive judgments by the parameter N(d). And by dividing the convertible bonds on Chinese markets into3types:equity-like, debt-like, and mix, this article studies the terms of convertible bonds one by one, and investigates if there’s significant difference on the terms between various types of convertible bonds or not. After that, for the delisted convertible bonds among the selected samples, conclusions come out as below:1. In general, the convertible bonds in China is with distinct equity characteristic2.There’s term design homogeneity for the convertible bonds in China, which means the differences between the convertible bonds are not reflected through the term designs.3. The convertible bonds in China are kind of delayed equity financing methods.