Issuance Announcement Effect Of Convertible Bond In Chinese Market

Using the data of convertible bonds issued during2002and2013and takingadvantage of event study method, this paper did empirical test on announcementeffect of both issuance and listing from the perspective of abnormal return. Accordingto the research result, issuance of CBs has a significant negative effect while thenegative effect of listing is not significant. Besides, this paper assign CB into differentgroups according to delta, whether the issuance is before or after the split shareholderstructure reform and whether the bond part and the option part can be tradedseparately to study the different issuance announcement effect correspondingly. Thenegative effect of bond-like CBs islarger than that of stock-like CBs, indicatingChinese companies prefer equity financing. After split shareholder structure reform,CBs’ issuancebrings larger negative effect on the stock price, which implies reformmakes the market more sensitive and efficient. Separately traded CBs’ issuance has aninsignificant positive effect on the stock price and we can say investors are in favor ofthe issuance because they can benefit from that.Afterwards, by taking the factors of company fundamental and CBs’ terms asexplanatory variables, this paper conduct general regression and stepwise backwardregression on the cumulative abnormal return of the event window, finding it ispositively related to debt-to-asset ratio, net profit margin on sales, relative issuancevolume and negatively related to dilution degree.