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Private placements of equity and accessibility of bank loans

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  • Xin Song
  • Chao Liu
  • Zijie Ding
  • Chenchen Huang
  • Qiongyao Zhang

Abstract

This study investigates the changes in quantity and cost of bank loans after a private placement of common stocks by A-share listed companies in China from 2011 to 2021. This research is derived from the signaling theory and is based on a difference-in-difference design. Through propensity score matching, the sample comprises companies that placed equity privately in the experiment group and companies that did not place equity privately in the control group. We find evidence that the increase in bank loans slowed down, and the cost of bank loans increased after the private placement. The signaling effect of private placements is robust to various additional tests. Further analysis indicates that when state-owned enterprises place equity privately, their access to bank loans is not affected. When institutional investors participate in the private placement, the company’s access to bank credit does not go through significant changes. In addition, private placements by companies located in regions with higher levels of marketization of the financial market do not reduce the cost of bank loans.

Suggested Citation

  • Xin Song & Chao Liu & Zijie Ding & Chenchen Huang & Qiongyao Zhang, 2023. "Private placements of equity and accessibility of bank loans," PLOS ONE, Public Library of Science, vol. 18(3), pages 1-16, March.
    • Handle: RePEc:plo:pone00:0281510
    DOI: 10.1371/journal.pone.0281510
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    References listed on IDEAS

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    1. Xin Song & Xiaodi Liu & Huiyu Chen, 2024. "Driving force of value reversal in Chinese overleveraged firms: The mechanism and path of private placement," PLOS ONE, Public Library of Science, vol. 19(5), pages 1-19, May.

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