Polluted IPOs

59 Pages Posted: 31 Mar 2022 Last revised: 15 Nov 2022

See all articles by Meng Miao

Meng Miao

Renmin University of China-School of Finance

Wei Wang

Queen's University - Smith School of Business

Zhengyu Zuo

Renmin University of China

Date Written: March 17, 2022

Abstract

Exploiting a unique institutional setting in the approval of initial public offerings (IPOs) in China, our paper shows that fine particulate matter pollution reduces the productivity of high-stakes decision-makers in the financial system. We find that regulators are more likely to approve IPOs on hazy days in Beijing. Our identification relies on the random assignment of IPO review members. Analysis of the review transcripts reveals that regulators ask fewer and less complex questions on hazy days. Green firms are more likely to be approved on hazy days. Firms approved on hazy days have worse stock and accounting performance after listing.

Keywords: Air Pollution, PM2.5, IPO, Regulatory Oversight, Cognitive Ability

JEL Classification: G18, G41, D91, Q5

Suggested Citation

Miao, Meng and Wang, Wei and Zuo, Zhengyu, Polluted IPOs (March 17, 2022). Available at SSRN: https://ssrn.com/abstract=4059255 or http://dx.doi.org/10.2139/ssrn.4059255

Meng Miao

Renmin University of China-School of Finance ( email )

59 Zhongguancun Street
Beijing, 100872
China

Wei Wang (Contact Author)

Queen's University - Smith School of Business ( email )

Queen's University-Smith School of Business
143 Union Street
Kingston, Ontario K7L 3N6
Canada

Zhengyu Zuo

Renmin University of China ( email )

Beijing, Beijing 100872
China

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