How Seasoned Equity Offerings Affect Firms: Evidence on Technology, Employment, and Performance
70 Pages Posted: 14 Feb 2018 Last revised: 13 Jan 2020
Date Written: March 2, 2019
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
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