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Lost in excess capital: Labor market consequences of IPO oversubscription in China

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Listed:
  • Li, Ruitao
  • Xia, Yanchun
  • He, Taisen
  • Peng, Xiaobing

Abstract

Using a sample of initial public offerings (IPOs) of firms listed on Chinas capital market between 2009 and 2022, this study examines the impact of IPO oversubscription on corporate employment decisions. We document that IPO oversubscription is associated with a reduction in employment. Mediation analysis shows that companies with oversubscribed IPOs are more inclined to use the funds to engage in corporate financialization practices, which in turn inhibits employment growth. Cross-sectional tests suggest that the negative effects of IPO oversubscription on corporate employment are more pronounced for firms with non-state ownership, high levels of tunneling by controlling shareholders, and heightened industry competition. Further analysis shows that IPO oversubscription significantly reduces the number of employees across all education levels. Moreover, IPO oversubscription negatively affects firms' market valuation. Collectively, our findings indicate that IPO oversubscription advances corporate financialization at the expense of employment.

Suggested Citation

  • Li, Ruitao & Xia, Yanchun & He, Taisen & Peng, Xiaobing, 2025. "Lost in excess capital: Labor market consequences of IPO oversubscription in China," Pacific-Basin Finance Journal, Elsevier, vol. 93(C).
    • Handle: RePEc:eee:pacfin:v:93:y:2025:i:c:s0927538x25002367
    DOI: 10.1016/j.pacfin.2025.102899
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    Keywords

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    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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