earticle

영어

The purpose of this study are to examine abnormal stock returns associated with announcement of convertible bond issuance. The empirical study has selected as final sample 75 domestic convertible bond issues for the periods from 1985 to 1992. In oreder to examine the abnormal stock returns of announcement periods from 1988 to 1992, and 32 oversea convertible bond issues for the period and various intervals of concern, the market model and the mean adjusted model have been employed. The test window covers before and after 11 days(D-5~D+5). The findings of information content can be summarized as follows: First, the result of domestic convertible bond shows that announcement of convertible bond issuance reduce stock prices significantly. this finding is consistent both with the hypothesis that equity issues are viewed by investers as negative signals and with the hypothesis that there is downward sloping demand for firm`s shares. Second, on the basis of an cumulative average abnormal returns for oversea convertible bond, the announcement of issuance convey positive signal. This result is consistent with information signalling model that higher debt ratios are binding constraints on the firm and thus signal positive management expectations concerning future cash flows. This study provides a further evidence regarding the usefulness of convertible bond issuance to investors` decisionmaking. It is, however, required clarify the difference of information contents between domestic and overseas convertible bond issuance. Various methodological refinements are also necessary.