How Do Equity Offerings Affect Technology Adoption, Employees and Firm Performance?
67 Pages Posted: 14 Feb 2018 Last revised: 9 Mar 2019
Date Written: March 2, 2019
We hypothesize that equity offerings affect employment, wages and firm performance by facilitating technology adoption. Using regulatory shocks on the eligibility to issue seasoned equity offerings (SEOs) in China, we find that over the two-to-three years following the infusion of external capital through SEOs, firms increase expenditures on technology-related fixed- and intangible assets, and employ fewer low skill workers and more high skill workers. The decrease of low skill workers outnumbers the increase of high skill workers, resulting in a net decline in firm-level employment. Within-firm average wages increase because of the higher skill composition of employees, but total wages remain unchanged because there are fewer employees after SEOs. Finally, SEOs substantially increase firm profitability and productivity. These findings illustrate how SEOs affect employment and firm performance when financially constrained firms face an opportunity to adopt productivity improving technologies.
Keywords: Firm-level Employment, Equity Issuance, Technology Investments, Skills, Wages, Firm Performance, Online Job Posting.
JEL Classification: G32, J21, J24, J31, L25
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