Abstract
This paper studies the announcement effects of the convertible bonds of 50 listed companies in the A-share market of China. The result shows that there are significant negative effects when the convertible bonds are issued, in other words, issuing announcement of the convertible bonds can lead stock prices to decline. However, the significances of the negative effects are different in different markets, bond types, released years and time windows. The volatility of share prices in Shanghai Stock Exchange is less than in Shenzhen Stock Exchange, and the negative effects are more significant than in SZSE. The announcement effect of the ordinary convertible bonds is more significant than the convertible bonds with warrants.
Highlights
The convertible bond is a kind of bond that allows the holders to convert the bonds into company stocks according to the terms formulated in advance within the stipulated time
This paper will study if the announcement information of issuing the convertible bonds in the A-share market can affect the stock price, and we will calculate the specific value of the effect
The effects are negative in the securities markets of the United States, Britain and France; it means that the issue of the convertible bonds would result in a decline in the company’s stock price
Summary
The convertible bond is a kind of bond that allows the holders to convert the bonds into company stocks according to the terms formulated in advance within the stipulated time. This paper will study if the announcement information of issuing the convertible bonds in the A-share market can affect the stock price, and we will calculate the specific value of the effect. The effects are negative in the securities markets of the United States, Britain and France; it means that the issue of the convertible bonds would result in a decline in the company’s stock price. The effects are positive in the securities markets of Japan and the Netherlands; it means that the issue of the convertible bonds would make the company stock price decline. The results show that the information of issuance will make the company’s stock price increase, and the value of the Cumulative abnormal return rate is 0.26% on Day 0 It means that the announcement results in a significant positive effect. Due to the facts that the studies are out of date, the samples are generally fewer and the results are uncertain, this paper selects 50 companies that issued the convertible bonds from January 23, 2007 to March 21, 2012 as the sample data and adopts the Event Study to research the announcement effects of the convertible bonds in the A-share market after the split share structure reform
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