Speaker: Robin Kaiji Gong (Hong Kong University of Science and Technology)

Time: 10:30 a.m. - 12:00 p.m., Oct 16, 2024, GMT+8

Venue: Rm 245, Chengze Yuan, National School of Development, PKU

Abstract: 

Equity financing differs from bank financing, and its effect on firms' export performance is under-studied. We leverage the unique institutional context in China, where a stringent approval-based IPO system is in place, necessitating that firms undergo a rigorous review process to achieve listing status. Our empirical strategy compares the export performance of successful IPO applicants with those of the "near misses” - the applicants rejected at IPO review meetings, the final stage of the review process. Our difference-in-differences analysis reveals that IPO approval leads to a significant increase of around 40% in firms' export value over the subsequent six years. In contrast to the existing research on debt financing, the effect of equity financing operates primarily through the extensive margin (expansions into more destination-product markets). Furthermore, we find that equity financing enhances firm exports via multiple economic mechanisms, including facilitating intangible capital accumulation, reducing informational frictions, and fostering risky foreign market exploration activities.

Source: National School of Development, PKU