Bangkok, August 25, 2014 - The SEC organized ?2nd SEC Working Papers Forum?, jointly with the Faculty of Commerce and Accountancy, Thammasat University presented research paper on ?How stocks react to bond issuance?. The paper showed positive response of listed companies? share prices to debenture issuance announcement, supported by the trade-off theory, weighting costs and benefits of debt financing.

Dr. Vorapol Socatiyanurak, SEC Secretary-General said that the SEC Working Papers Forum, organized under the MoU with four leading business schools aiming to provide a platform for capital market research presentation and implementation. In the second forum, the Faculty of Commerce and Accountancy, Thammasat University presented the paper on ?How stocks react to bond issuance?. Based on 2013 statistics, debt instrument issuance was used to raise fund in a great number; for instance, long-term bonds issued by listed companies accounted for almost 500 billion baht. Study on investor behaviors and decision making from debenture issuers? share price movement can, therefore, provide the issuers with information to select proper fundraising tools.  For investor decision making, they may also make use of signaling from credit watch placement which would affect listed companies? share prices.

Sakda Thirasophon, researcher, Faculty of Commerce and Accountancy, Thammasat University said that the study aimed to tackle two key research questions: (1) examining how share price responds to issuance of debentures by using the event study method; and (2) explaining the said response with applicable financial theory by running the multiple regression analysis. A sample group was collected from share prices of companies listed on the Stock Exchange of Thailand during 2004 ?2013 where the finding showed out that the stock market positively reacted to debenture issuances with abnormal profit. The said finding was based on the trade-off theory under which costs and benefits debt financing are weighted. If the benefits outweigh the costs, the stock market would positively react to the debenture issuance, and vice versa. As such, the study provided useful information for companies? decision making to choose appropriate fund raising tools to optimize their business values while helping investors to create efficient investment strategies.

Assoc. Prof., Dr. Chiraphol Chiyachantana, researcher, Faculty of Commerce and Accountancy, Thammasat University revealed that the study emphasized the importance of credit watch placement information given by credit rating agency prior to announcement of credit rating adjustment on listed companies? debentures. Findings pointed out that credit watch placement information had significant impact on the companies? share price movement, with stronger impact in cases where credit watch placement information had been given. Furthermore, the availability of credit watch placement information will help lessen share price volatility and benefit investors? investment decision making.

Note: The research paper was presented under the Memorandum Of Understanding between the SEC and Chulalongkorn University, Thammasat University, Kasetsart University and National Institute of Development Administration, the leading business schools, aiming to publicize researches and exchange of knowledge and experience between academics and capital market industry.