A Study Of Convertible Bond Financing Based On Risk Control Perspective

Convertible bond is a bond-based financial instrument which can be converted into the issuer's stock by investors during preconcerted period,at previously agreed conversion price.Usually the coupon rate of convertible bonds is lower than corporate-bond at the same credit level.Overseas convertible bond market has a history of more than 170 years,which has been mature and perfect with diversified types of convertible bonds and flexible issuing methods.The issuance of the first convertible bond in China less than three decades and immature capital market makes China's convertible bond market still in its infancy,as well as its issuing size and system specifications are far behind overseas convertible bond market.In February 2017,the new refinancing rules of the SFC limited the issuance of equity financing,encouraging listed companies to issue convertible bonds,and China's convertible bond market is about to usher in a period of rapid development.Convertible bonds have the characteristics of equity and claims,which can help monitoring the efficiency of capital utilization.And the coupon rate is usually lower than the bank loan interest rates,that makes issuer has lower financing costs.However,if the conversion is not successful,the issuer will face a crisis of centralized debt.In the past,academic research rarely involves the control of financing risk of convertible bonds.There are few examples of the failure of convertible bond issuance in China's capital market.The enterprise lacks awareness of risk control of convertible bond financing.Therefore,the research of this paper has a certain theoretical and practical significance.Based on the domestic and foreign academic research results and theories of convertible bonds and risk control,this paper explores the common risk types and financing risk formation mechanism in the process of issuing convertible bonds.On the basis of deeply analyzing the case of Fuji's financing,this paper proposes the methods of constructing the risk control system of convertible bond financing.The main contributions of this paper are as follows:Firstly,through the literature research method,this paper comprehensively sums up the theory of convertible bond financing and risk control.Based on the analysis of the differences between convertible bonds and other financing methods,this paper described the causes of financing risk and the formation mechanism.Secondly,the qualitative and quantitative analysis methods are used to identify and evaluate the risk of financing in Fuji's case.Finally,according to the results of the case analysis and the theory of risk control,the risk control measures of convertible bond financing are put forward,which mainly include financing decision-making control,control of efficiency of capital utilization,construction of risk early warning mechanism and risk emergency mechanism,improvement of supervision and performance appraisal.