How Seasoned Equity Offerings Affect Firms: Evidence on Technology, Employment, and Performance

70 Pages Posted: 14 Feb 2018 Last revised: 13 Jan 2020

See all articles by E. Han Kim

E. Han Kim

University of Michigan, Stephen M. Ross School of Business

Bruce Yuan Li

University of Southern California, Marshall School of Business

Yao Lu

Tsinghua University - School of Economics & Management

Xinzheng Shi

Tsinghua University - School of Economics & Management

Date Written: March 2, 2019

Abstract

We study how access to external financing affects the inputs of production and firm performance using exogenous shocks on the eligibility to issue seasoned equity offerings in China. SEOs lead to more expenditures on technology-related assets and fewer (more) low (high) skill workers. Low skill workers decrease more than the increase of high skill workers, resulting in fewer employees at the firm level. Employment declines more when firms invest more in technology post-SEO and are more financially constrained pre-SEO. Average wages increase because of the higher skill composition of employees, but total wages remain unchanged because fewer employees remain. Finally, SEOs substantially improve firm profitability and productivity.

Keywords: Equity Issuance, Employment, Technology Adoption, Skills, Wages, Firm Performance

JEL Classification: G32, J21, J24, J31, L25

Suggested Citation

Kim, E. Han and Li, Bruce Yuan and Lu, Yao and Shi, Xinzheng, How Seasoned Equity Offerings Affect Firms: Evidence on Technology, Employment, and Performance (March 2, 2019). Available at SSRN: https://ssrn.com/abstract=3115902 or http://dx.doi.org/10.2139/ssrn.3115902

E. Han Kim

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-764-2282 (Phone)
734-763-3117 (Fax)

Bruce Yuan Li

University of Southern California, Marshall School of Business ( email )

Los Angeles, CA
United States

Yao Lu

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

Xinzheng Shi (Contact Author)

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

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