January 14, 2022

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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Xu Ziyao choose further issue, convertible bond and stock allotment as research samples in order to explore the motive of the issue of convertible bonds of listed companies [33]. Studies indicate that the issue of stock financial tools will have prominent negative effect on stock finahcing, while the issue of bond financial tools will have positive effect on stock prices [5].

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.

Convertible bonds as backdoor equity financing

For those listed companies which plan further financing, the largest advantage compared with other ways of financing is its low cost. Journal of Finance, 42, Because the nature of financial instruments backdoot different, there are differences in issued announcement effect. The paper is not in the journal. Research on Economics and Management, No.

Convertible bonds have the option property that can be converted to stocks in due time, hence, convertible bond shareholders can avoid excessively high expected risk [27]. The Case of All-Equity Firms. Convertible bond is a financial gonds which develops on the basis of normal company bond and differs in that convertible bond holders choose to convert their bonds into stocks of targeted company at a specific time and an agreed price [1].


Convertible bond is a special bond and a way of financing that owns both the qualities of bonds and stocks. Journal of Banking and Finance, 22, 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].

Cite this paper Zhang, L. Journal of Financial and Quantitative Analysis, 15, Liu Eping studies convertible bond samples during andand find out that convertible bond announcement has significant negative effect [22]. Journal of Multinational Financial Management, 17, Chinese Review of Financial Studies, No.

EconPapers: Convertible bonds as backdoor equity financing

Reform of Economic System, No. Therefore, he points out that the original purpose of issued convertible bonds of company is to obtain equity financing through stock conversion of investors. Studies indicate that the cost of convertible bonds refinancing for listed company in China is significantly lower than that of equity refinancing.

Studies show that control right profit, equiry assets of each share and each share free cash flow have significant positive relationship with convertible bond financing of listed company.

Journal of Banking and Finance, 19, Studies on convertible bond announcement effect include theoretical studies and financjng studies which this paper focuses on the latter.

Theoretical Basis about Convertible Bonds and Announcement Effect The short-term market performance of convertible bonds refers to the direction and degree of influence that convertible bond issued announcement has on the equjty price of listed company, also called announcement effect.

A Summary of Literature: Convertible Bond Issue Announcement Effect

Journal of Finance, 57, As a consequence, market performance of convertible bonds is better than that of rationed shares and new equity. Journal of Financial Economics, 13, Studies from Abroad In the aspect of the interpret of announcement effect, information asymmetry and financing theory are the two major theories.


As a consequence, there are no uniform standards and theoretical analysis frame has been built. In this way, conclusions drawn can be persuaded and meaningful. Review of Financial Studies, 9, Only in this way, can the studies be persuaded.

In this way, agency conflict between shareholders and creditors to a certain extent. Conflicts of Interest The authors declare no conflicts of interest. 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].

Zeng Kanglin takes 20 listed companies which can issue detachable trade and convertible bonds during May 8th, and December 31st, and chooses the issue day of instruction booklet as the event day [24].

Friends of Accounting, No. Besides, the issue price of convertible bonds is generally high and if they are converted at a higher price, convertible bond holders will obtain more capital. The mechanism of positive influence that convertible bond has on performance is as follows: A Summary of Literature: They put forward various hypotheses and at the same time have the hypotheses tested.

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