Study Of The Announcement Effect Of Convertible Bonds Issued By China’s Listed Companies

As a kind of embedded option characteristic of debt financing instruments, convertible bonds combine the dual attributes of both debt and equity. Therefore, the research in the impacts of convertible bond issuance on the company’s share price has become the common concern of scholars at home and abroad. The study, by foreign scholars, of the announcement effect of convertible bonds, shows that there exist the announcement effect of convertible bonds in all the nations’capital markets, but the directions of the short-term stock price movements caused by the announcement effect vary from nation to nation. This is largely because there are differences between countries in corporate governing and equity holding structures. As a consequence, the study of the announcement effect of convertible bonds in China in the present special situation will be of great significance. However, up to now the conclusions from the academic study in China are not the same, especially in the different degrees and directions of the announcement effect, or even there appear completely opposite results. This paper is based on the context above.This paper firstly reviews the convertible bond financing theories and hypotheses, and thus sums up mechanisms and ways of convertible bonds financing’s impacts on the company’s stock price. Theoretically, it proves the existence of the positive announcement effect of convertible bond issuance. Then, it uses the event study method to analyze the announcement effect of convertible bonds publicly issued by China’s listed companies from2010to2014, which finally comes to a conclusion that convertible bond issuance has an positive effect on the company’s short-term share price. To expound the study results clearly, this paper, based on the convertible bond financing theories and hypotheses, proposes the factors of the announcement effect of convertible bonds issued by China’s listed companies and thus establishes a theoretical model to explain the effect of the announcement. In addition, this paper has an empirical analysis of the built theoretical model by backward screening and full regression methods, thus contributing to the degree and direction of the influence factors of the anno uncement effect. Based on these findings above, the paper puts forward relevant countermeasures on improving the announcement effect of convertible bonds issued by China’s listed companies, so as to promote the development of China’s convertible bond market.