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In Taiwan, there are some companies which they could not afford the pressure of bond (liability), and then collapsed in recent years. To sum up, there are 211 companies (Listed and OTC ones) had financial crisis from 1977 to 2010. Forty of financial-crisis companies have issued convertible bonds; in other words, the ratio is 18.95%, such as Cradle (3021), Kolin (1606), ProComp (2398), Everskill (6232), YHi (2418) Infodisc (2491), Pacific Electric Wire (1602), CDBank (2490), ProMOS(5387), and so on.
In this research, we will investigate that the company issuing convertible bonds of maturity of the debt, will produce the corresponding abnormal returns or not and set up investment strategy to help investors make (or avoid) convertible bonds due incidents of abnormal returns rate (positive or negative abnormal returns).
We employed event study method in this research, first empirical analysis of all samples, followed by the issuing company and then divided into empirical analysis of three empirical projects were "solvency", "debt ratio", "the amount of debt", and each project will be divided into five event windows, including " previously event date", "event period", "between the event date and the maturity date," "expiration period," and "due date afterward " to help investors look for the proper investing time.
The empirical analysis found that (1) samples were not classified under the analysis, a better approach time for the "previously event date" during this period may be short-strategy (sell), and on the "event date and the maturity period" is buy-strategy. (2) analyzes the solvency, a better approach time for the "previously event date", whether profit or loss on stocks, stocks can be in this period, the short-strategy. For loss of shares also can be "expiration period" for short-strategy. (3) Analysis of debt ratios, a better approach time for the "previously event date" no matter the level of
debt ratio can in this period, the short-strategy, debt ratio is less than 50% of the shares in the "between the event date and the maturity date", can be buy-strategy, debt ratio greater than 50% of the stocks available at the "expiration period" for short-strategy. (4) analyzed the amount of debt, a better approach time for the "previously event date"
the short-strategy. Stocks with low debt amount can be in the "between the event date and the maturity date" the buy-strategy.
In summary, the empirical findings include regarding "solvency" indicators, the performance of “earning group” is better than “loss group”; regarding "debt ratio" indicators, the performance of low-leverage companies is better than high-leverage ones; regarding and finally "the amount of debt" indicators, the performance of low payment amount is better than high one.
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