| Summary: | 碩士 === 淡江大學 === 財務金融學系碩士在職專班 === 103 === In the presence of information asymmetry, blockholders and insiders may take advantage of the characteristics of bookbuilding to manipulate their stock price during conversion price setting, in an attempt to transfer the wealth of external shareholders to them or any specific people. To avoid this behavior, the authority concerned has amended regulations governing conversion price setting in 2004. Focusing on convertible bonds issued by publicly listed firms in Taiwan during 2005~2013, a period where the amended regulations have gone into effect, this study uses the record date for setting conversion price of convertible bonds as the event day to observe the average abnormal return (AAR) and cumulative abnormal return (CAR) for these firms in different event periods.
Empirical results highlight a tendency among all the sample firms that a significantly positive AAR emerges several days before the record date for conversion price setting and persists until two trading days after the record date, suggesting that there is no underpricing of stock prices by blockholders or specific people and stock prices are raised during the conversion price setting period. It can be inferred that since the 2004 amendment of the regulations governing the record date for conversion price setting, the behavior of gaining an instant profit by setting a lower conversion price has been eliminated. In other words, this amendment has effectively inhibited blockholders’ and insiders’ intention to underprice their stocks one, three or five days preceding to the conversion price setting day. It should be noted that this finding persists even if the effects of market type, industry type or research period are controlled for.
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