The Invisible Hand of Short Selling: Does Short Selling Discipline Earnings Management?

• 成果类型: Article
• 署名作者: Massa, Massimo; Zhang, Bohui; Zhang, Hong
• 署名单位: INSEAD Business School; University of New South Wales Sydney; Tsinghua University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhu147
• 发表日期: 2015
• 页码: 1701
• 关键词: SHORT-SALES; corporate governance; Investor protection; Price discovery; stock returns; MARKET; QUALITY; WORLD; INFORMATION; EFFICIENCY

摘要

We hypothesize that short selling has a disciplining role vis-a-vis firm managers that forces them to reduce earnings management. Using firm-level short-selling data for thirty-three countries collected over a sample period from 2002 to 2009, we document a significantly negative relationship between the threat of short selling and earnings management. Tests based on instrumental variable and exogenous regulatory experiments offer evidence of a causal link between short selling and earnings management. Our findings suggest that short selling functions as an external governance mechanism to discipline managers.