It is generally held that firms with greater value volatility have stronger incentives to use convertible bonds; however, value volatility per se does not have a direct relationship with the motivation for issuing convertible bonds. Rather, firms where value volatility is likely to generate dead weight losses—such as financial distress costs, agency costs, and information costs—are incentivized to issue convertible bonds, which have a value-stabilizing effect, to reduce such losses. From this standpoint, this study sought to confirm the motivation for convertible bond issuance by examining the relationship between the financial characteristics related to value volatility of firms that issued convertible bonds and the market reaction to convertible bond issuance announcements. The results indicate that firms that publicly issued common stock-convertible bonds primarily carried interest cost burdens relative to their profitability. However, the market generally responded positively to convertible bond issuance announcements, and in particular, the firm's history, total asset growth rate, and return on total assets were found to have significant relationships with abnormal returns at the time of announcement. In summary, while firms in financial difficulty issue convertible bonds, the market responds positively only to those firms with growth potential, and because this positive effect is relatively large, the overall market response to convertible bond issuances appears to be positive.