Research On The Financing Motives And Effects Of Convertible Bond Of Listed Banks

Recently, listed banks’ capital quality decrease as the China economic slows, credit expansion also led to the decrease of the bank capital adequacy ratio. The exterior supervision over banks becomes more and more strict, which calls on higher requirements on capital adequacy ratio. To improve the capital adequacy ratio, lots of big banks have made plans for refinancing. Convertible bond is a general refinancing channel, banks can use it to provide funds with low-cost financing, and add capital effectively. Convertible bond can also adjust capital structure, agency cost, and governance structure by the restrain of debt contract. So, the motives and effects of convertible bond are worth researching.Minsheng Bank float convertible bond of A share 200 billion Yuan in March 2013, and announced to redeem the convertible bonds that have not been conversion in May 2015, in order to face the pressure on the capital cased by the credit expansion, deterioration of capital quality, and growth of institution, and face the higher requirements on capital adequacy ratio cased by the strict exterior supervision over banks. This paper takes Minsheng Bank for example, uses the case description method to research the financing motives and effects of convertible bond of Mingsheng Bank, hoping to provide reference for Minsheng bank and the other banks, and enrich the research of convertible bond.Firstly, this article elaborates the research background, significance, reviews the literature of financing motives and effects of convertible bond, summarizes China’s bank refinancing methods, and analyzes the current situation of the listed Banks’ convertible bond in our country. Secondly, this article turns on the financing motives and effects of convertible bond of Mingsheng Bank. Based upon analysis of the process, financing motives, and financing effect of convertible bond of Mingsheng Bank, this paper find that convertible bond of Mingsheng Bank reduced the stress of capital successfully, and improved the capital adequacy ratio and core capital ratio. But at the same time, convertible bond of Mingsheng Bank put an negative effects on Mingsheng Bank share price and performance, and threatened the corporate right of control. Finally, to improve capital and minimize the negative effect of refinancing, listed Banks in China should choose capital supply way and financing market flexibly, improve capital creativity, enhance the inside source margin and proactive in innovation and application of convertible bonds financial tools.