| Summary: | 碩士 === 國立中央大學 === 財務金融研究所 === 99 === This paper explores the relationship between convertible issue and stock liquidity risk, on the Taiwan market from 1988 to 2007. We evaluate stock liquidity with the liquidity measure( ) in Liu(2006), which is consisted of zero trading days and turnover. The result shows that stock liquidity will increase before convertible issue, that means company will issue convertible bonds when the information asymmetric is lower, which supports information asymmetric hypothesis. Further, company will keep better post-issue stock liquidity in three years, which means stock liquidity have long term improvement because of convertible issue. Otherwise, we use liquidity-augmented capital asset pricing model(LCAPM) in Liu(2006) to fit excess return on the Taiwan market. The result shows that it does not exist abnormal return after controlling liquidity risk and market risk, which demonstrates market risk and liquidity are sufficient to explain stock return on the Taiwan market.
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