Air Pollution and Analyst Information Production

Abstract

Recent studies investigate the impact of air pollution on labor productivity. We extend this literature by showing that air pollution negatively affects equity analysts in their role as information producers for capital markets. Compared to analysts experiencing clean air, analysts exposed to particulate matter (PM) pollution are less likely to issue timely/ bold (especially, negatively bold) forecasts or to improve their forecast accuracy. Both information supply and demand factors explain the variation in negative effects of PM pollution. Our results are robust to controlling for firm/analyst and time fixed effects, as well as additional specifications employing difference-in-difference designs and placebo tests.

Keywords: particulate matter (PM) pollution; air pollution; analysts; forecast timeliness

JEL Classification: M41