Research On The Economic Consequences Of Convertible Bonds Issued By Goer Tek

The enterprise financial management mainly focuses on financing,investment,working capital and profit distribution.Among them,financing management is an important part and plays a decisive role in the development of the company,because stable and sufficient financial support is to protect the business and the important factor of development.Thus,so as to meet the different financing demands of different companies,arising a considerable amount of financing instruments.However,due to the fact that traditional financing instruments always have such or such shortcoming,they cannot balance the cost of financing with the pressure of debt repayment.Convertible bonds are generated under such a background,relying on its flexible terms of design and relatively low financing costs,gradually becoming one of the major financing methods used by most listed companies.Convertible bonds have the characteristics of bonds,stocks and options at the same time.Investors can convert the convertible bonds from corporate bonds to common shares of the company through share conversion during the conversion period.Due to the existence of this special nature,the convertible bonds can not only make up for the shortcomings of traditional financing tools to a certain extent,but also satisfy the motivation of investors to pursue profit maximization.It has become a mature hybrid financial tool in the capital market.This article mainly adopts the research method of case analysis and considers the event of the convertible bonds issued by Goer Tek as a case study object.Based on a review of relevant documents concerning the causes of operations and financing effects of convertible bonds,first of all,the article introduced the case company Goer Tek,including the company's basic situation and the issuance process and basic terms of the convertible bonds issued by Goer Tek,and then proceeded to research on the causes of the convertible bonds issued by Goer Tek and its financing effect.After a comprehensive analysis of the financing cause and economic consequences of the convertible bonds issued by Goer Tek,it can be found that the convertible bonds issued by Goer Tek eased the company's capital pressure and provided financial support for the company's strategic transition period.However,the convertible bonds issued by Goer Tek have a negative impact on Goer Tek's main business profitability,asset return ability,shareholder equity appreciation ability,and the company's economic value added over a relatively short period of time at the same time.Through the summary of the case analysis,this paper believes that in order to achieve the company's capital replenishment goal and cut down the adverse effect of refinancing on the company,the listed companies in China ought to use the convertible bonds as a financing tool,carefully choose the time of issuance,control the size of the issue,properly design the maturity period,reasonably set the conversion price,and limit the number of downward revisions,to achieve the innovation and development of convertible bond financing.The purpose of this paper is to provide some useful reference value for prospective issuers who are prepared to choose convertible bonds for financing,and to make preliminary judgments on the changes in company financial performance,financial status and stock prices after the issuance of convertible bonds.