**4. Empirical Analysis**

#### *4.1. Industrial Distribution of Sample Companies and Events*

Table 1 shows the sample companies, events of the announcement of convertible bonds, and industrial distribution. The table particularly indicates 418 sample companies and 643 events of announcements of convertible bonds.

**Table 1.** Sample companies, events of the announcement of convertible bonds, and industrial distribution.


*4.2. Analysis on the Difference in Short- and Long-Term Performances after the Announcement of Convertible Bonds between High and Low Financial Constraints*

Table 2 demonstrates that the announcements of convertible bonds by low- and high-financial constraint companies negatively affect their short- and long-term performances. However, the negative effect of high-financial constraint companies is lower than that of low-financial constraint companies. For long-term performance, the cumulative AR, *LCAR0\_36* of high-financial constraint companies is −25.53%, whereas that of low-financial constraint companies is −46.97%. The difference between the high and low financial constraints is 21.44%, with a significance level of 5%. The cumulative ARs *LCAR0\_24*, (*LCAR0\_48*), and (*LCAR0\_60*) have the same empirical result. These findings sugges<sup>t</sup> that the companies with high financial constraints have higher long-term performance than those with low financial constraints.

**Table 2.** The effects of announcement of convertible bonds by low- and high-financial constraint companies on their short- and long-term performances.



**Table 2.** *Cont.*

Note: \* significant at 10% level; \*\* significant at 5% level. 1 The short-term performance including the cumulative AR from 0 to 5 days (*SCAR0\_5*), from 0 to 10 days (*SCAR0\_10*), from 0 to 15 days (*SCAR0\_15*), from 0 to 20 days (*SCAR0\_20*), from 0 to 25 days (*SCAR0\_25*), and from 0 to 30 days (*SCAR0\_30*). 2 The long-term performance, including the cumulative AR from 0 to 12 months (*LCAR0\_12*), from 0 to 24 months (*LCAR0\_24*), from 0 to 36 months (*LCAR0\_36*), from 0 to 48 months (*LCAR0\_48*), and from 0 to 60 months (*LCAR0\_60*).

#### *4.3. Short-Term Performance from High and Low Financial Constraints*

Table 3 illustrates that the short-term cumulative AR of high-financial constraint companies is negative. The cumulative ARs *SCAR0\_5*, *SCAR0\_10*, *SCAR0\_20*, and *SCAR0\_30* are −1.20%, −1.38%, −1.96%, and −2.31%, respectively, with statistical significance. The companies with low financial constraints have the same empirical results. These findings are consistent with the negative AR after the announcement of convertible bonds obtained by Dann and Mikkelson (1984), Stein (1992), Wolfe et al. (1999), Hillion and Vermaelen (2004), Ammann et al. (2006), and Duca et al. (2012).


**Table 3.** Short-term performances of high and low financial constraints.

Note: \* significant at 10% level; \*\* significant at 5% level; \*\*\* significant at 1% level.

#### *4.4. Long-Term Performance from High and Low Financial Constraints*

Table 4 shows that the cumulative ARs of the companies with high and low financial constraints are negative. However, the comparative analysis indicates that the cumulative ARs of the companies with high financial constraints, namely *LCAR0\_10*, *LCAR0\_20*, *LCAR0\_30*, *LCAR0\_40*, *LCAR0\_50*, and *LCAR0\_60*, are −9.72%, −21.03%, −23.83%, −31.99%, −43.00%, and −49.84%, respectively. For the same set of cumulative ARs, the companies with low financial constraints have −13.26%, −28.57%, −39.68%, −49.46%, −65.08%, and −78.66%. In summary, the cumulative AR of high-financial constraint companies is higher than that of low-financial constraint companies, with an increasing difference.


**Table 4.** Long-term performances of high and low financial constraints.

Note: \* significant at 10% level; \*\* significant at 5% level; \*\*\* significant at 1% level.

#### *4.5. Effect of Financial Constraints on Short-Term Performance after the Announcement of Convertible Bonds*

The results of the regression analysis in Table 5 imply that the regression coefficients of the effects of financial constraints *(HFC*) on the cumulative ARs *SCAR0\_5*, *SCAR0\_10*, *SCAR0\_15*, *SCAR0\_20*, *SCAR0\_25*, and *SCAR0\_30* are −0.0064, 0.0034, 0.0020, 0.0100, 0.0074, and 0.0100, respectively, without statistical significance. This finding shows that financial constraints insignificantly affect the short-term performance of companies after their announcement of convertible bonds.


**Table 5.** Effects of financial constraints on the short-term performances of companies after their issuance of convertible bonds.

Note: \* significant at 10% level; \*\* significant at 5% level; \*\*\* significant at 1% level.

#### *4.6. Effect of Financial Constraints on Long-Term Performance after the Announcement of Convertible Bonds*

Table 6 shows that the regression coefficients of the effects of financial constraints (*HFC*) on the cumulative ARs *LCAR0\_12*, *LCAR0\_24*, *LCAR0\_36*, *LCAR0\_48*, and *LCAR0\_60* are 0.1199, 0.2043, 0.2587, 0.2378, and 0.3127, respectively, with statistical significance. This observation suggests that financial constraints positively affect the long-term cumulative AR of companies, thus the companies with high financial constraints have higher long-term performance after they issue convertible bonds.<sup>3</sup>

**Table 6.** Effects of financial constraints on the long-term performances of companies after their issuance of convertible bonds.


Note: \* significant at 10% level; \*\* significant at 5% level; \*\*\* significant at 1% level.

<sup>3</sup> Panel data regression was run with fixed effect in addition to pooled ordinary least regression approach. This yielded favorable results which support our claim that companies with high financial constraints have higher long-term performance after issuing convertible bonds.
