How Do Equity Offerings Affect Employees and Firms?

64 Pages Posted: 14 Feb 2018 Last revised: 27 Sep 2018

See all articles by E. Han Kim

E. Han Kim

University of Michigan, Stephen M. Ross School of Business

Heuijung Kim

Sungkyunkwan University

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: September 19, 2018

Abstract

We investigate whether and how access to external equity financing affects firm-level employment, wages, and firm performance. Using regulatory shocks on the eligibility to issue seasoned equity offerings (SEOs) in China, we find SEOs increase purchases of machines and equipment, increase high skill workers, and decrease low skill workers. The displacement of low skill workers is greater than the addition of high skill employees, resulting in a net reduction in firm-level employment. Average firm wages increase because of the higher skill composition of employees, but total wages remain unchanged because of the decline in employment. Firm profits, outputs, and productivity increase following SEOs. These results highlight important impacts that accessibility to stock markets have on labor markets by allowing more investments in technology and altering demand for labor.

Keywords: Firm-level Employment, Equity Issuance, Technology Investments, Skills, Wages, Firm Performance, Online Job Posting.

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

Suggested Citation

Kim, E. Han and Kim, Heuijung and Li, Bruce Yuan and Lu, Yao and Shi, Xinzheng, How Do Equity Offerings Affect Employees and Firms? (September 19, 2018). 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)

Heuijung Kim

Sungkyunkwan University ( email )

53 Myeongnyun-dong 3-ga Jongno-ju
Seoul, 110-745

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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