Research On The Impact Of Management Capabilities On The Announcement Effect Of China's Convertible Bonds

With the continuous improvement of China's capital market,convertible bonds,as one of the important means of refinancing of Listed Companies in China,have also made considerable progress.In 2017,CSRC issued No.54 new refinancing policy,which directly proposed to encourage enterprises with financing needs to issue convertible bonds.On September 8 of the same year,SSE issued new regulations on convertible bonds,allowing investors to purchase convertible bonds by credit.These measures provide strong support and guarantee for the issuance and sale of convertible bonds,and make the convertible bond market move forward steadily.However,while the convertible bond market is booming,this paper observes that with the release of convertible bond announcement,the stock price of listed companies tends to show obvious fluctuations,that is,there is obvious convertible bond announcement effect.At the same time,it can also be seen clearly that when different companies issue convertible bond announcements,there are certain differences in the volatility of their stock prices.In order to systematically and scientifically test the rough observation in this practice,this paper uses the classic causal relationship identification method in Modern Econometrics-"event analysis method" to systematically test the announcement effect of convertible bond issuance of 187 listed companies in Shanghai and Shenzhen from July 2006 to September 2018,and introduces the "management ability(MA)" index to measure the management ability of enterprises Power.By testing whether there are systematic differences in the announcement effect of convertible bonds in enterprises with different management capabilities,this paper makes a more detailed investigation on the announcement effect of convertible bonds.Firstly,this paper uses the event analysis method to analyze the abnormal rate of return of the stock price of the subject stock within T± n trading days before and after the announcement of the plan and issuance of convertible bonds,in order to explore the announcement effect and significance of China's convertible bond market.It is found that China's convertible bonds will bring negative announcement effect to the stock price after the release of the plan,but it is not significant;on the first few trading days and the day of the release of the announcement,there is a positive excess return of the stock;after the release of the announcement,the stock price shows a significant negative excess return.Secondly,the data envelopment analysis method is used to measure the management ability(MA)of each enterprise,and the regression analysis is made between the management ability of listed companies and the average cumulative excess return(ACAR)of stock price,in order to find out the difference between the announcement effect of convertible bonds of companies with different management ability.It is found that there is no significant difference in the effect of plan announcement among companies with different management capabilities,while the effect of issuance announcement is quite different.Among them,before the issuance of the announcement,the higher the ability of the management,the stronger the significance of the announcement effect;after the issuance of the announcement,the ability of the management has no significant relationship with the effect of the announcement.Thirdly,according to the data of the abnormal return of the stock price and the relationship between the abnormal return and the ability of the management,the results are analyzed and explained properly.It is found that the higher the ability of the management and the more significant the announcement effect are before the issuance of the announcement,which may be due to the stronger market expectation or the existence of gossip after the convertible bonds have passed the examination of the development and Audit Commission and the CSRC.However,after the issuance of the announcement,there is no significant correlation between the ability of the management and the announcement effect of the enterprise.That is to say,the increase of the ability of the management does not reduce the decline of the convertible bonds of the enterprise.This may be because the equity market in China can be well explained by the price pressure theory,and the return effect of the convertible bonds value in China is often more obvious.Finally,according to the conclusion of the whole study,this paper puts forward appropriate policy recommendations.The suggestions of this paper include the following three points: first,when Chinese companies announce the convertible bond plan,they can learn from the disclosure principles of foreign listed companies,disclose the specific information of financing as carefully as possible,so as to provide proper guidance and judgment for investors.Second,when determining the downward amendment and conditional redemption of convertible bonds and other special terms,the governance layer can consider setting up multiple critical points and implementing mechanisms such as gradual amendment and redemption in the division of critical point indicators,so as to reduce the problem of great impact on investors and listed companies' earnings when the terms with rights are triggered.Third,when investors choose to invest in stocks,they should take whether the enterprise has recently carried out equity financing banks such as convertible bonds as one of the reference factors,in order to get more accurate investment conclusions.