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Does air pollution affect seasoned equity offering pricing? Evidence from investor bids

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  • Han, Lin
  • Cheng, Xiaoke
  • Chan, Kam C.
  • Gao, Shenghao

Abstract

We examine the impact of air pollution on investor bidding behavior and seasoned equity offering (SEO) discounts using a sample of Chinese SEOs from 2013 to 2019. Our findings suggest that worse air pollution faced by investors leads to lower investor bid prices and larger SEO discounts. Air pollution adversely affects the issuance of new shares. The effect is more salient for the SEOs with both individual and institutional investor bids, whereas this impact is minimal for SEOs with only institutional investor bids, suggesting that individual investors are more prone to severe emotions and cognitive bias due to air pollution than institutional investors.

Suggested Citation

  • Han, Lin & Cheng, Xiaoke & Chan, Kam C. & Gao, Shenghao, 2022. "Does air pollution affect seasoned equity offering pricing? Evidence from investor bids," Journal of Financial Markets, Elsevier, vol. 59(PB).
    • Handle: RePEc:eee:finmar:v:59:y:2022:i:pb:s1386418121000392
    DOI: 10.1016/j.finmar.2021.100657
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    References listed on IDEAS

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    Cited by:

    1. Gao, Shenghao & Liu, Jinzhao & Zhang, Qi & Zhou, Jun, 2023. "Stock hyping before auction-style SEOs: Are primary market investors misled?," International Review of Economics & Finance, Elsevier, vol. 88(C), pages 123-140.
    2. Sun, Qian & Cheng, Xiaoke & Gao, Shenghao & Chen, Tao & Liu, Jia, 2023. "Sunshine-induced mood and SEO pricing: Evidence from detailed investor bids in SEO auctions," Journal of Corporate Finance, Elsevier, vol. 80(C).
    3. Wu, Junfeng & Liu, Baohua & Chang, Samuel & Chan, Kam C., 2022. "Effects of air pollution on accounting conservatism," International Review of Financial Analysis, Elsevier, vol. 84(C).
    4. Roy, Suvra & Nguyen, Harvey & Visaltanachoti, Nuttawat, 2023. "Be nice to the air: Severe haze pollution and mutual fund risk," Global Finance Journal, Elsevier, vol. 58(C).
    5. Li, Haoyang & Yang, Mingjing & Chan, Kam C. & Gao, Shenghao, 2022. "Do institutional investors’ corporate site visits impact seasoned equity offering discounts? Evidence from detailed investor bids in SEO auctions," Research in International Business and Finance, Elsevier, vol. 62(C).

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    More about this item

    Keywords

    Air quality; Investor sentiment; SEO pricing;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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