Analysis of Factors Influencing the Premium on the First Trading Day of Convertible Bonds in China

Since 2017, the issuance of convertible bonds in China has accelerated significantly, and convertible bonds have become a major way of financing for listed companies, while convertible bonds, as an emerging investment variety, have many more indicators that deserve in-depth study. The premium rate of convertible bonds is an important indicator of convertible bonds, and it is necessary to study the factors affecting the premium on the first trading day of convertible bonds. This paper conducts multiple linear regression analysis on the premium rate with these factors, and finds that the issue size, industry, conversion value, positive stock volatility, the timing of issuance, and the proportion of convertible bonds to the total market value has a significant impact on the premium of convertible bonds on the first trading day, and explains the reasons for the impact of these factors, and finally, uses the multiple linear regression model derived from the above factors to backtest the premium of convertible bonds and evaluate its fitting effect and further explain the reasons for the large errors. The findings of this paper have a positive effect on investors' rational investment, listed companies' formulation of convertible bond terms, and relevant departments' formulation of related policies so that the convertible bond market can become a healthier investment and financing tool.