Investors’ Natural Disaster Experience and Cost of Raising Equity Capital: Evidence From Seasoned Equity Offering Pricing

Shenghao Gao, Xinyu Li, Siyang Tian and Qi Zhang

Journal of Business Finance & Accounting, 2026, vol. 53, issue 2, 1053-1076

Abstract: We investigate whether and how investors’ experiences of natural disasters affect the cost of raising new equity in a setting of seasoned equity offerings (SEOs). Our proprietary database contains comprehensive information on geographical distribution, investor profiles, investor office location, and bidding specifics related to SEOs. Our results show that encounters with natural disasters lead investors to demand greater bid discounts. Analysis of economic channels suggests that these investors exhibit reduced risk‐taking behavior, influenced by the wealth effects, salience, and changes in background risk associated with the traumatic events. As well, we find that task‐specific experience in SEO practice, rather than general professional experience, mitigates disaster experience bias. Further, the bid discount translates into greater SEO underpricing, thereby increasing the cost of raising equity capital. Overall, our study highlights a novel mechanism by which natural disasters can contribute to financial market frictions.

Date: 2026
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