Please use this identifier to cite or link to this item:
https://hdl.handle.net/2440/124416
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Type: | Journal article |
Title: | Short selling and firms' disclosure of bad news: evidence from regulation SHO |
Author: | Clinch, G. Li, W. Zhang, Y. |
Citation: | JOURNAL OF FINANCIAL REPORTING, 2019; 4(1):1-23 |
Publisher: | American Accounting Association |
Issue Date: | 2019 |
ISSN: | 2380-2154 2380-2146 |
Statement of Responsibility: | Gregory J. Clinch, Wei Li, Yunyan Zhang |
Abstract: | As informed traders, short sellers enhance the informativeness of stock prices, especially related to bad news, potentially reducing the benefits and increasing litigation and reputational costs of withholding bad news by managers. We exploit a quasi-natural experimental setting provided by the introduction of SEC regulation SHO (Reg-SHO), which significantly reduced the constraints faced by short sellers for an effectively randomly selected subsample of U.S. firms (pilot firms). Relative to control firms, we find pilot firms increase the likelihood of voluntary bad news management forecasts, provide these forecasts in a more timely manner, and accelerate the release of quarterly bad earnings news. Each of these effects is stronger for subsamples of moderate (compared with extreme) bad news, firms facing high (relative to low) litigation risks, and firms with a forecasting history. Similar effects are not observed for voluntary good news forecasts. A range of robustness tests reinforce our results. |
Keywords: | Short selling Voluntary disclosure Litigation risk |
Description: | Published Online: March 2019 |
Rights: | © 2019 American Accounting Association. |
DOI: | 10.2308/jfir-52401 |
Published version: | http://dx.doi.org/10.2308/jfir-52401 |
Appears in Collections: | Aurora harvest 8 Business School publications |
Files in This Item:
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hdl_124416.pdf | Accepted version | 890.7 kB | Adobe PDF | View/Open |
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