Convertible bond issuance and liquidity of small-cap listed companies

Conghua Wen; Rui Jiang; Xiao Lin

doi:10.1016/j.frl.2025.107297

Convertible bond issuance and liquidity of small-cap listed companies

Conghua Wen, Rui Jiang, Xiao Lin^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

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.

Original language	English
Article number	107297
Journal	Finance Research Letters
Volume	79
DOIs	https://doi.org/10.1016/j.frl.2025.107297
Publication status	Published - Jun 2025

Keywords

Convertible bond
External attention
External oversight
Small listed company
Stock liquidity

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10.1016/j.frl.2025.107297

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title = "Convertible bond issuance and liquidity of small-cap listed companies",

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.",

keywords = "Convertible bond, External attention, External oversight, Small listed company, Stock liquidity",

author = "Conghua Wen and Rui Jiang and Xiao Lin",

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year = "2025",

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doi = "10.1016/j.frl.2025.107297",

language = "English",

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AU - Wen, Conghua

AU - Jiang, Rui

AU - Lin, Xiao

PY - 2025/6

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N2 - 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.

AB - 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.

KW - Convertible bond

KW - External attention

KW - External oversight

KW - Small listed company

KW - Stock liquidity

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SN - 1544-6123

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JO - Finance Research Letters

JF - Finance Research Letters

M1 - 107297

ER -

Convertible bond issuance and liquidity of small-cap listed companies

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