A Research On Impact On The Market Price And Actual Value Of Convertible Bonds By Downward Revision Of The Conversion Price

With the continuous revision of the refinancing policy,the constraints on the private placement financing of listed companies,and the relaxation of the threshold for the subscription of convertible bonds in the "Securities Issuance and Underwriting Measures"(September 2017),China’s convertible bond market has developed rapidly.Due to the continuous fluctuation of the market,there are more and more cases of triggering special downward revision clauses in China’s convertible bond market to revise down the conversion price.The game of downward revision of the conversion price of convertible bonds has attracted more attention from listed companies and investors.This article discusses the impact of downward revision of the conversion price on the market price and actual value of convertible bonds.Using the method of case study,this thesis selects the convertible bond issued by Hubei Ji Chuan Pharmaceutical Company on November 13,2017(referred to as Ji Chuan Convertible Bond)as an example to study the impact of downward revision of the conversion price on the market price and actual value.Based on the calculation of the event research method,the cumulative abnormal return rate of Ji Chuan Convertible Bond during the ten trading days before and after the announcement date of the downward revision of the conversion price was as high as 7.5573%,indicating that the downward revision of the conversion price had a very positive effect on the market price of convertible bonds.Based on the estimation of the Black-Scholes model,after the conversion price of Ji Chuan Convertible Bond is revised downward,the actual value of Ji Chuan Convertible Bond increases from 108.13 yuan to 120.99 yuan,and the growth rate reaches 11.89%,indicating that the downward revision of the conversion price will greatly increase the actual value of convertible bonds.In addition to the introduction and conclusion,this article consists of four chapters.The first chapter mainly introduces the background of convertible bonds and the downward revision of the conversion price,and the second chapter mainly introduces the case of this article,namely Jichuan Convertible Bond.The third chapter uses the event study method to discuss the impact of the downward revision of the conversion price on the market price of the convertible bond,and the fourth chapter uses the Black-Scholes model to study the effect of the downward revision of the conversion price on the actual price of the convertible bond.According to the research conclusions of this thesis,it is suggested that listed companies should strengthen the research on the convertible bond market.When designing the terms of convertible bonds,pay special attention to the conditions that trigger the downward revision of the conversion price,including the determination of the conversion price,the price conditions for triggering,and the time interval for triggering.At the same time,for investors,they should pay attention to the investment opportunities that may be brought about by the downward revision of the conversion price of convertible bonds,and pay attention to the range of the downward revision of the conversion price,relevant announcements and implementation time.This paper attempts to discuss one dimension of the market price and actual price of convertible bonds,in order to further enrich the research on convertible bonds,and to help issuers and investors of convertible bonds,however,due to the representation of the case itself and the strict assumptions of the relevant models,the results may be biased to a certain extent,and the sample can be further expanded for research and discussion.