The Study Of Financing Motivation Of Issuing Convertible Bonds In China’s Listed Companies

Under the background of high concentrated ownership and the existence of control benefits, this paper, from the perspective of corporate governance, makes a comparative analysis using the observations of all newly issued convertible bonds(CBs) and seasoned equity offerings(SEO) in A share market during2002to2013. Unlike the earlier studies, this paper combines the implicit and explicate control structure innovatively, and applies them to describe the quality of corporate governance of China’s listed companies. Then, by using logit model, mediating effect test and panel data model, this paper ultimately discusses the internal mechanism and financing motivation of issuing convertible bonds in China’s listed companies.The main conclusions are as follows:(1) Financial distress risk is an important consideration for China’s listed companies, when they are considering what types of financial instruments they’d like to choose;(2) Consistent with the previous hypotheses put forward by foreign scholars, China’s listed companies issuing CBs aim at cutting down the agency cost and adverse selection cost. Furthermore, issuing CBs can be an alternative mechanism to corporate governance, in other words, the worse companies’corporate governances, the more likely to issue CBs;(3)The main agency problem of China’s listed companies is the second type of agency cost, this type of agency costs plays as a positive mediator variable between ownership concentration and the preference of using CB for financing;(4)Even though companies which under the serious control of controlling shareholders are more likely to issue CBs for financing, CBs haven’t become tools for controlling shareholders to go for the maximization of control benefits.The innovation of this paper lies in:(1) Instead of using the variable of "The ratio of the largest shareholder", this paper combines implicate and explicate control structures to describe ownership structure and the quality of corporate governance.(2) We explore the inner mechanism of the motivation of issuing CBs from the mediating effect of agency cost and panel data model;(3) Our paper empirically tests the viewpoint of He Jia and Xia Hui (2005) for the first time that, CB has become a tool for controlling shareholders to expropriate the wealth of others.Unfortunately, this paper also has some limitations. Restricted by objective conditions, the samples of CB financing companies are relatively small; indeed, we only have75CBs in the cross-sectional data. Besides, due to the different conditions of issuing corporation bonds and the sample period, we do not take the corporation bonds issuing companies into consideration; therefore, this may lead to some limitations in this paper.