Abstract
This paper analyzes the case of Wharf’s participation in Greentown China’s corporate governance under the investment of convertible bonds, and brings the case of market value growth. It reveals that the strategic investors have passed the three stages of “value support—value driven—value realization”. The bond issuer realizes value creation and achieves a win-win situation for both parties. The study found that strategic investors and bond-issuing companies have complementary resources and positioning strategies to provide strong value support for cooperation between the two parties. The key processes driven by value include the investment phase and the corporate governance phase. In the investment phase, choosing the right financing method and designing the refined terms provide the basis for strategic investors to participate in corporate governance. In the corporate governance stage, strategic investors can restrain overinvestment by issuing sound financial policies bonds, and participate in the investment decision-making of bond-issuing enterprises to create business synergies. The realization of value is reflected in the two aspects of market value improvement and business improvement.
Highlights
The introduction of strategic investors has been adopted by many commercial banks and state-owned enterprises in China during the transition period
In the investment phase, choosing the right financing method and designing the refined terms provide the basis for strategic investors to participate in corporate governance
Can strategic investors be able to achieve corporate governance for bond issuers through convertible bond investment and create value for bond issuers? What is the mechanism of this value creation? Compared with investment methods such as additional issuance and share allotment, what is the uniqueness of debt investment in influencing the value of bond issuers?
Summary
The introduction of strategic investors has been adopted by many commercial banks and state-owned enterprises in China during the transition period. In 2012, Wharf, in the role of strategic investor, invested in convertible bonds in Greentown China, which was in the midst of a financial crisis, to “turn the crisis into safety” in terms of finance and operations. There are few studies on strategic investors and convertible bond financing, as well as how strategic investors can play a synergistic role and participate in corporate governance to influence the value of bond issuers. Can strategic investors be able to achieve corporate governance for bond issuers through convertible bond investment and create value for bond issuers? This paper adopts the case study method, taking the example of Wharf’s Investment Greentown China as an example to explore the complex process of strategic investors’ convertible bond investment, and construct the process mechanism of strategic investors to create value for bond issuers through convertible bond investment, construct a corresponding value creation model. On the basis of answering the above three questions, enrich the theory of strategic investors and corporate investment, and create value for strategic investors for bond issuers, provide beneficial theory and practical experience in strategic synergy, business integration and participation in corporate governance
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