CONVERTIBLE BONDS AS BACKDOOR EQUITY FINANCING PDF

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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The paper is not convdrtible the journal. Pei Zhenzhen makes a comparison about listed companies which issued convertible bonds and public further issue during January, and April, on the basis of theories and hypotheses abroad [34]. Cite this paper Zhang, L. Issued announcement effect differs owing to the different natures of different financing tools. Bond announcement effect, also called shareholder asset effect, mainly checks backcoor influence of the issue of bonds to the price of company stocks.

Journal of Financial Economics, 21, They put forward various hypotheses and at the same time have the hypotheses tested.

EconPapers: Convertible bonds as backdoor equity financing

Besides, if equity investment is valueless, investors will not convert their shares, then the regulation of payment of both principal and interest at a regular time will reduce free cash flow in internal company. Studies on the issue of convertible bonds of listed company start late in China, and only a few study fruits can be found. Conflicts of Interest The authors declare no conflicts of interest. However, the pricing effect intensity of convertible bond differs in different markets due to different management mechanism and corporate governance structure, among which the American market is the most significant [12]convertible bond issued announcement in European and American market has less negative effect than that in American market [13].

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Liu Yancheng and Wang Qiwen study convertible bond samples of 21 companies and study indicates that there is no significant abnormal profit on neither the day after nor before the announcement day, with 0.

Xu Ziyao choose further issue, convertible abckdoor and stock allotment as research samples in order to explore the motive of the issue of convertible bonds of listed companies [33]. Studies on convertible bonds from abroad concentrate on convertible bond pricing, convertible bond investment, convertible bond announcement effect and its optimal execution strategy [10]. Conclusions Conclusions can be made on the basis of the analysis of literature review of scholars in various countries.

Journal of Financial and Quantitative Analysis, 15, Issue cost and over-investment are emphasized in the two-period model he designs.

A Summary of Literature: Convertible Bond Issue Announcement Effect

Journal of Multinational Financial Management, 10, In China, researches prove that convertible bond issue pre-arranged plan will have clear negative effect, but there are a lot of controversies over the explanation of negative cnvertible at home which mainly result from the limitation of the amount of samples, short time scale of selected samples and different research methods, etc.

Studies in China Studies on the issue of convertible bonds of listed company start late in China, and only a few study fruits can be found. Studies from Abroad Studies from abroad on convertible bonds has a long history and are relatively comprehensive which benefit from boncs mature capital market in developed capitalist countries [9]. Therefore, he points out that the original purpose of issued convertible bonds of fjnancing is to obtain equity financing through stock conversion of investors.

Convertible bonds as backdoor equity financing

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]. Zhang Weidong believes that when listed company issues convertible bonds, convertibble performance will financinf decrease notably because there is no exploitation that non-circulation shareholders impinge on circulation shareholders [23].

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Meanwhile the negative effect is mainly on the announcement day. Liu Eping studies convertible bond samples during andand find out that convertible bond announcement has significant negative effect [22]. Convertible Bond Issue Announcement Effect.

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Studies from Abroad In the aspect of the interpret of announcement effect, information asymmetry and financing theory are the two major theories. In obnds past, studies on finance performance of companies which have issued convertible 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.

finacing Studies indicate that the cost of convertible bonds refinancing for listed company in China is significantly lower than that of equity refinancing. This is not scientific.

Journal of Financial and Quantitative Analysis, 29, An Empirical Analysis for the Dutch Market. Meanwhile, income tax will be reduced due to tax shield effect of bonds.

They believe that convertible bonds charge different rates for interest and dividend, and in this way, its property of reducing tax will stand out. As a consequence, its cost is below that of private company bonds. Generally speaking, announcement convfrtible generally refer to the influence brought by the issue or occurrence of an economic or political event.