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Convertible bond issuance and liquidity of small-cap listed companies

Author

Listed:
  • Wen, Conghua
  • Jiang, Rui
  • Lin, Xiao

Abstract

Convertible bond is one of the important financing tools for companies and affect their stock market performance. We employ a Multi-period Difference-in-Differences (DID) approach to investigate the impact of convertible bond issuance on stock liquidity of listed small companies. Empirical evidence indicates that their liquidity is significantly enhanced following the issuance of convertible bonds. The issuance can facilitate greater market attention. Meanwhile, the bonds are subject to external supervision of debt credit ratings, which in turn enhances the liquidity. The heterogeneity analysis indicate that conversion dilution ratio is negatively associated with the impact of convertible bond issuance on liquidity.

Suggested Citation

  • Wen, Conghua & Jiang, Rui & Lin, Xiao, 2025. "Convertible bond issuance and liquidity of small-cap listed companies," Finance Research Letters, Elsevier, vol. 79(C).
    • Handle: RePEc:eee:finlet:v:79:y:2025:i:c:s1544612325005604
    DOI: 10.1016/j.frl.2025.107297
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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