Polluted IPOs

Using location- and time-specific fine particulate matter pollution (PM2.5) data in Beijing, we document that regulators are more likely to approve IPOs in China on hazy days. Our results are robust to specifications that control for listing firms’ characteristics, the composition of the IPO review committee, and industry, quarter, IPO firms’ province, and review committee chairman fixed effects, and using wind speed as an instrumental variable. IPOs of firms in green industries are more likely to be approved on hazzy days. IPOs approved on polluted days perform poorly after initial listing. Natural language processing of the questions raised by the review committee reveals that committee members ask fewer, shorter, and less complex questions on hazy days. The effect is more pronounced among older and nonlocal reviewers. The evidence suggests that air pollution has real effects on the productivity of high-stakes decision-makers.