| Summary: | 碩士 === 東吳大學 === 企業管理學系 === 92 === This study examines the effects of stock returns at stated periods of call announcements of convertible bonds in Taiwan market. Due to more and more convertible bonds issued in recent years and the lack of researches into relationship between stock returns and call announcement of convertible bonds, it’s necessary to understand the market condition of convertible bonds and call status. This study selected 44 call announcement cases from August 2001 to March 2004 as analyzing samples among the listed companies which had successfully issued the convertible bonds in Taiwan stock market. The research made use of event study associated with regression in the market model and estimated parameter by OLS and GARCH to comprehend the abnormal stock returns at study period of call event.
The result of our study showed that most of the convertible bonds in Taiwan conclude with converting and this is associated with characteristics of equity bonds. Statistics show that the negative stock return on the announcement day is not significant, but on the day after announcement stock return is significant negative. However, the stock returns recover afterward because of the positive cumulative returns several days later. Furthermore, the accumulated stock return before call announcement is negative and after is positive. Despite before or after call announcement, the cumulative returns are not statistical significant and that implies call announcement almost causes no effects.
Like many previous studies, a call announcement of convertible bonds is accompanied with the price decline of the firm’s common equity. The descent yet quick reversal in stock price shows that the effects caused by the call announcement of convertible bonds are temporary. Thus, this finding in Taiwan market supports the liquidity hypothesis of Mazzeo and Moore (1992) that the decline in price following conversion-forcing calls is quickly reversed.
|
|---|
