Climate Risk Inquiries and IPO Pricing: Evidence from China’s Registration-Based IPO System

Abstract

Against the backdrop of frequent extreme weather events and the accelerating low-carbon transition, how climate risk information enters IPO pricing has become increasingly important. Using 1137 firms listed under China’s registration-based IPO system from July 2019 to February 2024, this study identifies climate-risk-related questions in exchange-issued IPO review inquiry letters through question-level textual analysis. We estimate OLS regressions with listing-year, industry, and listing-board fixed effects and heteroskedasticity-robust standard errors. Climate risk inquiries are measured using an inquiry indicator and the logarithmic number of questions, and the results are tested using alternative dependent variables, a narrower dictionary, controls for other inquiry topics, and propensity-score-matched samples. The results show that climate risk inquiries are significantly associated with lower IPO first-day returns, greater supplemental climate risk disclosure, and weaker investor subscription demand. The pricing association varies across risk and policy environments. Firms receiving climate risk inquiries also show lower post-IPO Tobin’s Q and higher environmental investment intensity. These findings suggest that the IPO review inquiry process may serve as an institutionalized mechanism associated with the elicitation, transmission, and pricing of climate risk information.