CASH FLOW, LIKELIHOOD OF CONVERSION AND CORPORATE FINANCING DECISION： CASE OF TAIWANESE CONVERTIBLE BONDS OFFERING

• Main Authors: Shin-I Tang, 唐心怡
• Other Authors: Hai-Chin Yu
• Format: Others
• Language: en_US
• Published: 2003
• Online Access: http://ndltd.ncl.edu.tw/handle/94395813277396130814

碩士 === 中原大學 === 國際貿易研究所 === 91 === Abstract **The cash flow interpretation applied in this research is established by Helfert' s (1982) model and modified by Gentry and Lee (1995). This model is originally suggested in interpreting the linkage between cash flow performance of the securities' issuer and the equity component of various financing securities. In this research, owing to the short expected time to conversion and the strong “Back Door” features of Taiwanese convertible bonds, the likelihood of conversion may be considered as a mechanism when distinguishing the equity component embedded in convertibles but also a determinant in the examination about Financial Health Hypothesis upon issuers. According to Burlacu (2000), we firstly distinguish the convertible bonds into 3 types, i.e. debt-like, mixed, and equity-like convertible bonds, according to their likelihood of conversion. Later, three empirical are performed under Variance Test, Tobit Model, and T Test to examine the interpretative ability of issuers’ cash flow performance and other associate variables to the equity component in convertible bonds, which is measured in likelihood of conversion and may be a suggestive measurement for outside investors to investigate the different types of convertible bonds. In conclusion, we document that convertibles offerings in Taiwan are generally used as an indirect financing vehicle for getting equity into capital structure by most corporate. Meanwhile, the findings are identical to the financial health hypothesis, which refers to a tendency for a financially healthier corporate to offer a more debt-like convertible bond with lower likelihood of conversion, especially under the purpose of distinguishing itself from unhealthier ones according to Pecking Order Theory when facing with its external financing decision with convertible bond offering.