This study uses the sequential financing concept suggested by Mayers [15] to test the purpose of issuing convertible bonds in Taiwan market. We use two kinds of measures, cash flow and capital structure, to test the hypotheses. Since the forced conversion is not as popular in Taiwan convertible bond market as in U.S.A., we use instead voluntary conversion as the research alternative. We conclude that the ratio of cash out flow of investment activities to the total asset is not significantly inclining after voluntary bond conversion. On the other hand, the ratio of cash flow of operating activities to the total assets is not significantly declining after voluntary conversion. We thus cannot get enough evidence to support the argument on over-investment. The new financing is not significantly increasing after voluntary conversion, and thus the hypothesis that issuing convertible bonds will prompt new financing activities is neither sufficiently supported.