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Convertible Bonds and Firm Value: Evidence from China and Beyond

Author

Listed:
  • Po Li

    (University of Macau)

  • Tingting Que

    (University of Macau)

  • Jing Xie

    (University of Macau)

  • Yuxiang Zhong

    (Huazhong University of Science and Technology)

Abstract

Analyzing data on convertible bond issuances by Chinese firms, this study demonstrates that firms issuing convertible bonds achieve significantly higher market value compared to their counterparts. To mitigate endogeneity concerns, we utilize matching procedures and leverage the 2017 regulatory reform, which exogenously increased convertible bond issuances in China. Our analysis of the underlying mechanisms reveals that the positive effect of convertible bond issuance on firm value is primarily driven by the enhancement of the firm’s investment efficiency. The positive impact on firm value is particularly pronounced among firms with foreign investors, better corporate governance and more transparent information environments. In addition, we extend our analyses to international settings and provide consistent worldwide evidence that convertible bond issuance has significantly positive effect on firm value.

Suggested Citation

  • Po Li & Tingting Que & Jing Xie & Yuxiang Zhong, 2025. "Convertible Bonds and Firm Value: Evidence from China and Beyond," Working Papers 202522, University of Macau, Faculty of Business Administration.
    • Handle: RePEc:boa:wpaper:202522
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    File URL: https://fba.um.edu.mo/wp-content/uploads/RePEc/doc/202522.pdf
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    More about this item

    Keywords

    Convertible bonds · Firm value · Information environment;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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