Download Citation on ResearchGate | Convertible Bonds as Backdoor Equity Financing | Pigovian taxation of externalities has limited appeal if the tortfeaser. This paper argues that corporations may use convertible bonds as an indirect ( albeit . Backdoor equity financing hypothesis of Stein () receives universal . Thu, 08 Nov GMT convertible bonds as backdoor equity pdf -. Convertible financing. Jeremy C. Stein* bonds as backdoor equity. Massachusetts.

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Mayers put forward continuous financing hypothesis on the basis of the uncertainty of future investment equity value [30]. Zeng Kanglin takes 20 listed companies which can issue detachable trade and convertible bonds during May 8th, and December 31st, and chooses the bnds day of instruction booklet as the event day [24].

Journal of Banking and Finance, 19, Suppose that personal stock return rate has a linear relationship with market return rate and stock return regression model will be built on market return rate. Conclusions Conclusions can be made on the basis of the analysis of literature review of scholars in various countries. Besides, convertible bonds exist longer abroad and issued quantities and the amount of money of convertible bonds are relative large.

The short-term market performance of convertible bonds refers to the direction and degree of influence that convertible bond issued announcement has on the stock price of listed company, also called announcement effect. Due to the right of choice, the interest of convertible bonds is lower than that of normal bonds [2].

They believe that convertible bonds charge different rates for interest and dividend, and in this way, its property of reducing tax will stand out. Convertible Bond Issue Announcement Effect. American Journal of Industrial and Business Management6 Conversion option is added to bonds, the over-fluctuation of stock prices will be reduced and company risk will be lowered.

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There are a lot of papers on empirical study of convertible bond issued announcement effect and studies indicate that in most part of the market, convertible bond announcement appears negative effect in price [11]. Studies show that control right profit, net assets of each share and each share free cash flow have significant positive relationship with convertible bond financing of listed company.

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Studies from Abroad In converrtible aspect of the interpret of announcement effect, information asymmetry and financing theory are the two major theories. Finance and Accounting Monthly, No.

The Case of Event Studies. Therefore, he points out that the original purpose of issued convertible bonds of company is to obtain equity financing through stock conversion of investors. In the aspect of study of convertible bond issue motive, scholars from abroad have deeper researches and put forward various hypotheses and then verify them.

A Summary of Literature: Convertible Bond Issue Announcement Effect

In the aspect of the interpret of announcement effect, information asymmetry and financing theory are the two major theories. It can be seen that convertible bonds play the role of tax shield.

The article gives the literature review on the issue of announcement effect and its influencing factors of target stocks. Studies on the issue of convertible bonds of listed company start late in China, and only a few study fruits can be found.

EconPapers: Convertible bonds as backdoor equity financing

Journal of Finance, 50, Since the conversion period of convertible bonds in quite long and capital stocks will increase gradually, the profits of each share and net assets will be diluted step by step [4]. Convertible bonds have the option property that can be converted to stocks in due time, hence, convertible bond shareholders convertibpe avoid excessively high expected risk [27].


Kang and Stulz abnormal return rate of announcement effect is positive which is contrary to European and American countries [18]. Cite this paper Zhang, L. However, the pricing effect intensity of convertible bond differs in different markets due to different management mechanism and corporate governance cnovertible, among which the American market is the most significant [12]convertible bond issued announcement in European and American market has less eqiuty effect than that in American market [13].

Studies indicate that the cost of convertible bonds refinancing for bondss company in China is significantly lower than that of equity refinancing. Journal of Finance, 61, Friends of Accounting, No. European Financial Management, 10, The mechanism of positive influence that convertible bond has on performance is as follows: This is not scientific.

In western countries, due to mature stock market, scholars have a head start and have a relatively thorough study in convertible bond influencing factors.

In the past, studies on finance performance of companies which have issued convretible bonds at home usually draw the conclusion that performance gets worse only on the basis of the data one year or two before or after the issue of convertible bonds. A Summary of Literature: Studies from Abroad Studies from abroad on convertible bonds has a long history and are relatively comprehensive which benefit from the mature capital market in developed capitalist countries [9].

The Case of All-Equity Firms.

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