Research On Corporate Investment And Financing Decision-making With Convertible Bonds Under Debt Renegotiation

After 17^th Feb 2017,the China's Securities Regulatory Commission has revised the rules about listed companies'private stocks issuance and published a regulatory requirement file about regulating listed companies'financing behaviors.These two files set new restrictions on listed companies'refinancing,especially on private issuing shares.However,the convertible bond has characteristic of both stocks and bonds and is not restricted by these two files.So,the convertible bond has become a popular refinancing tool for listed companies.But we also need to notice that the number of Chinese companies'debt is as much as about 150%China's GDP,two third of debt is owned by SOEs?State owned enterprise?.If listed companies finance with convertible bond,they need to set proper covenants with debtholders to reduce risks from convertible debt.This thesis is based on the capital structure with equity and convertible bonds,researching debt renegotiation's effects on capital structure,conversion time,option value and optimal renegotiation time.The thesis research these problems from two aspects.One is that debt renegotiation is introduced into a company financing with equity and convertible bonds.Expressions of equity value,debt value,and firm value is provided by neutral risk pricing,and the renegotiation threshold and conversion threshold are solved by numerical program.Numerical analysis shows three main results:compare to bankruptcy,debt renegotiation can increase firm value,equity value;especially when equityholder's bargain power is in some interval,debt renegotiation can increase debt value,reduce leverage,enhance society welfare.;stronger bargain power of equityholder can accelerate conversion of convertible bond and debt renegotiation;the optimal coupon is in opposite proportional to bargain power of equityholder.The other one is that an implementation lag is introduced into the first model.Using risk neutral pricing theory,the optimal investment threshold and option value is solved under different implementation lag.Numerical analysis shows three main results:Under same implementation lag,compared to liquidation,weaker?stronger?quityholder's bargain power in debt renegotiation leads to earlier?later?investment;first investment cost and equityholder's bargain power all have effects on the relation between implementation lag and investment threshold;with implementation lag increasing,weaker?stronger?equityholder's bargain power leads to later?earlier?investment when first investment cost is low;investment delays with implementation lag increasing,but the stronger equityholder's bargain power,the less degree of delay;debt renegotiation can increase option value,and it is proportional to equityholder's bargain power,in opposite proportional to implementation lag.