Earticle

초록

영어

In the Korean convertible bond market, there is a refix option that allows for the adjustment of the conversion price according to a fall in stock prices. This is a unique system in Korea. In this study, we look into how a refix clause of convertible bonds impacts the wealth of shareholders, and analyzed whether the aim of this clause, which is to protect investors, is valid. The refix option is a system where the conversion price of convertible bonds is pulled down when the stock price falls after the security’s issuance. For investors, this could be beneficial, as the number of stocks one can receive increases despite a fall in stock prices. However, for shareholders, it can mean dangers of stock dilution, resulting from an increase in the number of issued stocks. This paper analyzes the impact of refix clauses on shareholders, by studying the existence or nonexistence of refix effect and the announcement effect of refix clauses. Study results are as follows: First, a higher negative market response was observed after an announcement to issue a convertible bond with a refix clause. Second, the market also responded negatively even at the point in time that a refix in price actually occurs, which suggests that “refixing” of convertible bonds undermines wealth of actual shareholders. Third, it was found that the announcement effect less negative as the share of the majority shareholder goes higher, which points to a correlation between the share of the majority shareholder and the refix clause. Compared to the United States and other developed countries, the current refix clause in Korea seems to excessively focus on the protection of convertible bond investors, and there seems to be room for improvements in the future.

목차

Abstract
 1. Introduction
 2. Literature review and the Current State of Convertible Bond Refixing
  2.1 Literature review on Convertible Bonds
  2.2 Current State of Convertible Bond Refixing and Discussion on Illegality
 3. Design of research
  3.1 Data and sample used
  3.2 Model
 4. Main Result
  4.1 Market response to the issuance announcement of CB
  4.2 Market response on refixing announcement
  4. 3. Market response by share of major shareholder
 5. Conclusion
 References

키워드

저자

• Jinho Byun [ Ewha School of Business ]
• Kyung-Hee Park [ Ewha School of Business ]

참고문헌

발행기관

간행물

표지보기 관심저널 등록

• 간행물명

  한국재무학회 학술대회

• 간기

  부정기

• 수록기간

  2006~2024

• 십진분류

  KDC 325 DDC 330