A Study On The Motivation And Effect Of Directed Convertible Bond M&A Payment

In November 2018,the CSRC actively promoted the pilot work of using directional convertible bonds as a payment tool for M&A transactions,and supported enterprises to become better and stronger through M&A.Directional convertible bonds are issued by a company to specific objects,and specific objects can be converted into corporate bonds issuing company shares according to the agreed conditions within a certain period of time.What are the differences between the directional convertible bond payment and the traditional cash payment and share payment in the process of enterprise merger and reorganization?What are the factors that influence the choice of directional convertible bond as payment method? What effect will the directional convertible bond M&A payment produce? Research on these issues can enrich the existing convertible bond research and provide more reference for the application and promotion of directional convertible bond M&A payment.Based on trade-off theory,signaling theory and financial contract theory,the paper constructs the theoretical framework of the influencing factors and effect influencing path of enterprises choosing directional convertible bonds as the payment method of M&A.The paper takes the King-Strong as the research object,and briefly introduces the case from the aspects of general situation,and plan of M&A.Combined with the actual situation of enterprises,the paper analyzes the motivation of King-Strong choosing directional convertible bonds payment in the process of M&A.Besides,the paper analyzes the effect of directional convertible bonds payment from the perspective of its market performance and governance effect.The paper finds that the influencing factors of enterprises choosing directional convertible bonds payment in the process of M&A include policy,M&A strategy,equity structure and financial condition.Directional convertible bonds can improve the short-term market performance of enterprises,increase the debt repayment pressure of enterprises,alleviate the dilution of equity and reduce the cost of creditor's rights and equity agency.When choosing directional convertible bonds,the paper suggests that enterprises should fully consider their own actual situation and scientific design of directional convertible bonds scheme.The paper also advices that the regulatory authorities should improve the relevant supporting policies.Combining theory with case study,this paper analyzes the motivation and effect of directional convertible bonds payment in the process of M&A,and draws conclusions and suggestions accordingly.It may provide reference for the enterprises that choose directional convertible bonds payment in the future,so as to promote the development and growth of enterprises through M&A.In addition,it can provide reference for relevant regulatory authorities to improve the relevant system of directional convertible bonds,and promote the development of directional convertible bonds in the capital market.