Private placements of equity and accessibility of bank loans

• Published in: PloS one Vol. 18; no. 3; p. e0281510
• Main Authors: Song, Xin, Liu, Chao, Ding, Zijie, Huang, Chenchen, Zhang, Qiongyao
• Format: Journal Article
• Language: English
• Published: United States Public Library of Science 15.03.2023; Public Library of Science (PLoS)
• Subjects: Asymmetry; Bank loans; Banks (Finance); Biology and Life Sciences; Capital markets; Credit policy; Debt financing; Decision making; Discount rates; Earnings management; Engineering and Technology; Equity financing; Financial markets; Financial services industry; Government business enterprises; Hypotheses; Initial public offerings; Institutional investments; Loans; Management; Placement; Private placement; Private placements (Securities); Research and Analysis Methods; Securities markets; Services; Signaling; Social Sciences; Stock exchanges; Stockholders; United States; China
• ISSN: 1932-6203; 1932-6203
• DOI: 10.1371/journal.pone.0281510

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.