Convertible bond issuance and liquidity of small-cap listed companies

Conghua Wen, Rui Jiang and Xiao Lin

Finance Research Letters, 2025, vol. 79, issue C

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; Stock liquidity; Small listed company; External attention; External oversight (search for similar items in EconPapers)
JEL-codes: G14 G15 G41 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:79:y:2025:i:c:s1544612325005604

DOI: 10.1016/j.frl.2025.107297

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