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.
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