How Do Equity Offerings Affect Employees and Firms?

Publish Date: Nov 4, 2018    Last Update: Nov 4, 2018


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.

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