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Chinese companies must undergo a review by a regulator-appointed committee before proceeding
with initial public offerings (IPOs). We find that firms, particularly politically unconnected
ones, are more likely to pass this review on polluted days (i.e., high level of
PM2.5). The effect appears driven by reduced cognitive capacity among reviewers, reflected
in fewer and simpler questions raised during review sessions. Notably, firms approved
on polluted days show no significant performance difference from other firms within
three years after the IPO. The findings suggest that pollution-induced cognitive fatigue may
paradoxically reduce distortions in a politically influenced approval process.
