The impact of air pollution on management earnings forecasts: Evidence from China

Existing studies highlight the importance of air pollution in stock market participants’ information production. We extend this literature by investigating the impact of air pollution on management earnings forecasts among Chinese listed firms. Our findings show that air pollution significantly decreases management earnings forecasts voluntarily released by firms. Empirical results are robust to alternative measures, additional controls, the pseudo forecast date test, the difference-in-differences method and the instrumental variable approach. We further identify managerial ability and management mood as underlying mechanisms. The effects of air pollution are more pronounced among firms with fewer female executives, older executives, and less-educated executives. JEL Classification: M41, G30, Q53