Journal of Accounting, Finance & Management Strategy





Volume 15, Number 2, December 2020

The Signal Transmitted through a Convertible Bond’s Capital Inflation Rate and Conversion Rate: Evidence from Taiwan


This study employed the Fama French three factors model and an intermediary effect test to examine the correlation between the capital inflation rate of convertible bonds on the conversion rate and the stock’s rate of return. The empirical evidence shows that the capital inflation rates among shareholders and managers differs depending on the conversion rate of convertible bonds, and that issuing firms prefer equity financing methods with a higher rate of stock return before expiration. The findings offer an effective method for selecting sources of finance and provide investment guidance to investors when buying and selling convertible bonds.

Keywords: Convertible Bonds, Capital Inflation, Manager Shareholding, Financing Preference, Conversion Rate

JEL Classification: G12, G32, G13, G18, G21