Discussion On The Financing Behavior Of Exchangeable Bonds

China’s A-share market has encountered many problems in the development,one of the main problems is the impact of the concentrated sale after the restriction of restricted shares.The China Securities Regulatory Commission issued a trial regulation to promote the issuance of exchangeable bonds by listed company shareholders in 2008.The initial intention was to use exchangeable bonds as an emerging financing tool to deal with the issue of holdings in the A share market at the time.The adverse effects caused by the normal operation of China’s A shares.With the development of China’s capital market,exchangeable bonds are no longer limited to solving the problem of “large and small”.The main purpose of its implementation is to enrich the types of bonds,improve the financing system,and provide new opportunities for corporate mergers and acquisitions,restructuring,financing,market value management and reduction Ideas.Exchangeable bonds have an important feature,that is,its issuer is not the issuer of the stock,but the shareholder of the stock issuer.The investors of the exchangeable bonds can choose whether to exchange the exchangeable bonds for the shares of the listed company pledged by the issuer within the agreed time.The development history of exchangeable bonds in China’s capital market is relatively short.The concept of exchangeable bonds first appeared in China in 2008.Until 2016,the number of successfully issued exchangeable bonds in the domestic market gradually increased,providing us with a broad environment to study the application of exchangeable bonds.However,Chinese scholars’ research on exchangeable bonds in financing is still in its infancy and lacks research experience on terms design and risk control.Therefore,after studying a number of regulations on exchangeable bonds promulgated by the Securities and Futures Commission,this article conducts a comprehensive analysis of exchangeable bond financing cases based on an understanding of the issuance of exchangeable bonds in the capital market,and how companies can reasonably issue exchangeable bonds.And why the supervisory authorities should strengthen the supervision of the issue of exchangeable bonds by SMEs and provide theoretical basis.This article selects Xindao Investment to issue exchangeable bond financing as a case,and uses a combination of theoretical analysis and case analysis for research.The main body consists of five parts.The first part starts from the background of the booming exchangeable bonds in China’s capital market in recent years,clarifies the research background and significance of this topic,and reviews the motivation,pricing mechanism,clause design and risk control of issuing exchangeable bonds.Finally,the research ideas,research methods and basic framework of this paper are introduced.The second part introduces the theoretical part for analysis.Based on the theory of information asymmetry,preferential financing theory,principal-agent theory and stakeholder theory,it is used in the concept,constituent elements of exchangeable bonds and the characteristics of its application in corporate financing.After sorting out,it introduces the key contents of the issuable debt financing,namely the program elements and the risks that may exist during the issuance process,and lays a theoretical foundation for the case analysis below.The third part is an introduction to the case of Xindao Investment’s issuance of deliverable debt financing.First,it introduces the basic situation of the bond issuer’s main company and the target company.Then it explains that Xindao Investment’s shares are restricted by the lock-up period after the subsidiary is listed,but it is urgent in the context of fund expansion business,use private exchangeable bonds with the advantages of early sale of restricted shares and low-interest funds to raise funds.Finally,the issuances,exchanges,and resale of 17 Lead E1 are described.The fourth part is a concrete analysis of the case of Xindao Investment’s issuable bond financing,combining financial data and non-financial data,focusing on the specific scheme design and issue control measures of Xindao Investment’s issuable bond financing.The analysis objectively evaluates the effectiveness of Xindao Investment’s issue of exchangeable bond financing in terms of financial benefits,corporate governance,and shareholders’ equity.The fifth part is the completion and revelation of the case.By way of the in-depth resolution of the case,the main conclusions of this article are summarized,and the feasibility suggestions for the issuance of exchangeable bonds are provided to help companies use the exchangeable bonds for financing.The elements of the scheme design and the risks that are easy to be caused during the implementation process have certain reference significance to other small and medium-sized innovative enterprises that are planning to issue exchangeable bonds.Through the analysis of the case,this article draws the following conclusions:(1)Xindao Investment uses exchangeable bonds to introduce strategic investors to enhance the comprehensive competitiveness of the enterprise;(2)Use exchangeable bonds to avoid the lock-up period of restricted shares and achieve the purpose of reducing holdings and cash in advance;(3)Flexible use of bond issuance terms can protect the interests of both parties to the transaction;(4)A financing modelcombining exchangeable bonds and targeted issuance can optimize the company’s equity structure.The case of Xindao Investment’s issue of exchangeable bond financing also brings us some enlightenment:(1)Small and medium-sized innovative enterprises should improve their conditions and use exchangeable bond financing reasonably;(2)Companies should select appropriate listed company shares as the subject stocks to assure the successful release of exchangeable bonds;(3)Both parties to investment and financing should pay attention to potential risks and strengthen risk prevention and control;(4)Financial intermediaries should improve their professional standards and rationally design terms for customers;(5)Government regulatory agencies the design of rules should be strengthened to enhance the disclosure of information on exchangeable bonds.