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The monitoring of short selling: Evidence from China

Deng, X and Gao, L 2018 , 'The monitoring of short selling: Evidence from China' , Research in International Business and Finance, vol. 43 , pp. 68-78 , doi: 10.1016/j.ribaf.2017.07.087.

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Abstract

In the world second largest economy, the largest emerging market, an environment that ischaracterized by a weak legal system, a high level of government intervention, and an underdevelopedbut fast evolving financial market, we investigate whether short selling is associatedwith regulators’ enforcement actions and reduces the future crash risk. By using manually collectedfirm level lawsuit data, we find that short selling is positively associated with probabilityfor the firm of being targeted or punished by CSRC (China Securities Regulatory Commission). Inaddition, we find short selling reduces the future stock price crash risk. These findings suggestthat short selling monitoring provides supplementary monitoring power to the financial markets.Moreover, our results provide information that can inform policy making.

Item Type: Article
Authors/Creators:Deng, X and Gao, L
Keywords: corporate regulation, China’s enforcement actions, corporate governance, short selling, crash risk
Journal or Publication Title: Research in International Business and Finance
Publisher: Elsevier Inc.
ISSN: 0275-5319
DOI / ID Number: 10.1016/j.ribaf.2017.07.087
Copyright Information:

Copyright 2017 Elsevier B.V.

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