An Empirical Study On Send-convert Policy Excess Returns In SME Listed Companies

The send-convert stocks has long been one of the most popular themes ofmarket, as well as the focus of academic research. For Listing Corporations’implement of distribution policy, the general concerns are the scale of market reactionscaused, how to explain the phenomenon theoretically, and search for the factors whichcaused the market reactions. This paper intends to explore the phenomenon andcourses of excess returns in China’s SME board market caused by send-convertpolicies according to the above three aspects.This paper selects research simples including send-convert policies from January1,2010to August25,2013in the SME board market, excluding ST stocks, thefinancial sector stocks and other stocks which firstly implement send-convert policyafter IPO, set the announcement date of the events as window period to carry outresearch.First of all, the describing of practical features in the SME board market showed ayearly increasing trend of send-convert events as well as an increasing tendency ofhigh proportion of send-convert in such events, and the implementing policies variesgreatly between different industries.Secondly, using the CAPM as the calculation method to get the expected returnrate of sample stocks,and the actual return rate minus the expected return rate to getexcess return.The results shows the excess return from send-convert policies is arelatively common phenomenon, and has certain regularity: the market responds threedays before the announcement date, the one-day excess return is positive and enlargeslowly, reaches a maximum at the announcing date. Then fell sharply,and thephenomenon of excess return disappeared four days later,. The excess return ofcompanies in growing industry are significantly higher than the excess return ofcompanies in mature industry.Lastly, the paper studied the possible influent factors based on related dividendpolicy theories, using multiple linear regression model to get empirical results, and inthe same time examine hypothesis proposed at the beginning of research.Theconclusions are as follows:the stock price has no relation with the excess return; theoperating profit growth has a negative correlation with excess return;the delivery ratioand concentration of ownership have positive correlation with excess return. The most important effecting factor of excess profits is the turnover rate, and index such as theextensive increasing proportion, the company’s total share capital and the undistributedprofit have slight effect on the excess return. The theory of Optimal Stock TradingRange, Signal Transfer and Dividend Catering Theory are not suitable; while the PriceIllusion Hypothesis, the Clientele Effect Theory and to Agency Cost Hypothesis areapplicable.