Study On The Motivation And Financing Effect Of Convertible Bonds Issued By LJ Shares

In recent years,China has implemented a series of policies aimed at promoting and facilitating convertible bond financing.As a result,the convertible bond market has grown rapidly and convertible bond financing has gradually become one of the main financing methods for listed companies.To examine the impetus behind LJ Corporation’s convertible bonds and the financing impact following their issuance,this article selects LJ Corporation,a leading photovoltaic enterprise,as the research subject.Additionally,the article aims to analyze whether this financing tool can provide a new channel for the financing of the photovoltaic industry,and consequently lead the development of the industry.Based on domestic and international literature on the motivation and financing effect of convertible bonds,this paper firstly explains the concept and characteristics of convertible bonds,and compares the advantages and disadvantages of convertible bonds with other financing methods.The paper also discusses the theory of convertible bonds that will be covered or applied in this paper;secondly,it gives a detailed overview of the case company LJ Corporation and its convertible bond issuance plan and implementation;secondly,it explains the motivation of LJ Corporation’s convertible bond issuance through two perspectives: external and internal motivation;finally,the paper uses event study method and comparative analysis method to measure the financing cost,market response,financial performance and equity effect of LJ Corporation’s convertible bond issuance respectively.Finally,the paper uses the event study method and the comparative analysis method to measure the financing cost,market response,financial performance and equity structure of LJ shares after the issuance of convertible bonds to analyze its financing effect.The research findings indicate that:(1)Due to the inappropriate timing of convertible bond issuance and the setting of conversion prices at an unreasonable level,LJ Corporation failed to achieve low-cost financing through convertible bond issuance;(2)The stock price trend and market reaction before and after the announcement of LJ convertible bonds performed well,and investors showed a positive attitude towards the issuance of convertible bonds,which had a positive impact on shareholder wealth;(3)This statement suggests that the issuance of convertible bonds has had a positive impact on the financial standing of the company.Specifically,it has allowed for an optimization of the capital structure,leading to improved financial performance and a reduction in financial risks;(4)During the conversion process of convertible bonds,the controlling shareholder’s shareholding ratio did not change significantly,and the dilution of equity was not significant,thus having minimal impact on shareholder rights and interests.Overall,it can be seen that LJ Corporation’s choice to issue convertible bonds for financing was reasonable and rational.However,the financing process also had problems and shortcomings.To address these issues,reasonable suggestions should be made from the perspectives of the issuer and regulatory authorities.Specifically,these suggestions include predicting the future direction of the stock market and carefully choosing the timing of issuance,scientifically and reasonably designing the issuance terms based on their own situation,and strengthening the information disclosure system for convertible bonds.