| Convertible bond is a complex financial derivatives better than th at of direct debtfinancing and indirect equity financing, With the development of Chinese financialmarket, convertible bond occupies more and more important position in the field ofinvestment and financing. Redemption rights is an important component included,exploring the effects of convertible bond redemption notice help s issuing companiesand investors understand convertible bonds profoundly, and provides a reference forthe issuing companies’s financing strategies and investors’s investment strategies.The methods used in this paper are the event study methodology and multivariateregression analysis.Firstly this paper figures out the basic situation of China’sconvertible bond redemption after reviewing the theory, then it selects listedcompanies which called convertible bonds up to2013as research samples, usingevent study method to test the stock price effects of the redemption, and constructsmultiple linear regression models to analyze its influencing factors; In addition, whileanalyzing the "price" and combining with the analysis of the "quantity", this paperexamines the volume effect of redemption; Finally, it studys the market’s reactionspeed of the redemption announcement on the basis of the high frequency stock pricedata.The results show that redemption announcement has negative effects on stockprices. And it is still significant during30days after the announcement. Stock price isaffected by the company’s growth, profitability and convertible bonds characteristic.The bond trading volume is not significantly affected by the redemption. But it beginsto rise slightly after the announcement and reaches a higher value in the next day.This phenomenon is related to cash conversion and the T+1trading system. What ismore, it is an indirect evidence to verify the price pressure hypothesis; Market’sreaction to the announcement of the redemption is not immediately. It is usually need7-8half-hour trading intervals to appear after the announcement.The conclusions of this paper are significant for issuing company to determinethe optimal timing and to optimize the design of the convertible bond provisions, it issignificant for investors to develop investment strategies as well. |
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