The monitoring of short selling: Evidence from China

Deng, Xiaohu; Gao, Leilei

doi:10.1016/j.ribaf.2017.07.087

Cited by 28 publications

(7 citation statements)

References 26 publications

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“…This transformative reform of the capital market brought about a breakthrough in China's A-share market, ending the over 20-year history of its buy-only trading market. Empirical studies referring to short-selling have described short-sellers as sophisticated investors, who can identify overvalued stocks (Miller 1977), detect managers' misbehavior (Massa et al 2015), reveal firms' real earnings management (Fang et al 2016), improve environmental protection investment (Wang and Zhang 2020), and act as firms' external monitoring governance (Deng and Gao 2018). As such, assessing the economic implications of short-selling is important in financial analysis.…”

Section: Introductionmentioning

confidence: 99%

Short-Selling and Financial Performance of SMEs in China: The Mediating Role of CSR Performance

Mai

Hamid

2021

IJFS

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The aim of this study is to examine the effect of short-selling deregulation on the financial performance of SMEs in China. The external governance role of short-selling is also tested by adopting corporate social responsibility (CSR) performance as the mediating effect. This study investigates a panel data analysis with a sample of 5038 firm-years of SMEs listed in Shenzhen Stock Exchange from 2010 to 2019. The PSM-DID method is adopted in this study to alleviate self-selection and endogenous problems to observe the comparable pure effect of short-selling deregulation, while the mediation test is conducted based on Baron and Kenny’s model. The finding of this study showed that the existence of short-selling could enhance firm financial performance and the mediating effect of CSR performance position in their relationship. In addition, the further analysis revealed that the mediating effect of CSR is more pronounced for family businesses and firms with high real short-selling threats. The robust test of alternative measurements is conducted and valid. This study provides insights for policymakers to consider further short-selling ban lifting and corporate executives to practice more CSR activities to improve the financial performance. Limitations and further implications of this study are also discussed.

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Section: Introductionmentioning

confidence: 99%

Short-Selling and Financial Performance of SMEs in China: The Mediating Role of CSR Performance

Mai

Hamid

2021

IJFS

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“…Massa et al then focused on the relationship between short selling potential and corporate earnings management in the market, by using worldwide stock short selling data from 2002 to 2009 were validated. The results show that there is a strong negative relationship between SSP and earnings management and that short selling reduces firms' incentives to engage in earnings management [6]. Also with a developing country context, Lin discusses the functions or limitations of short selling in emerging markets, finding that with the rapid growth of foreign investment in developing countries, the information quality effects of short selling are critical for foreign investors as well as local regulators and that emerging markets need to improve their governance mechanisms while lifting the ban on short selling [7].…”

Section: Related Researchmentioning

confidence: 94%

“…Information quality effects are critical in short-selling activities for both investors and regulators. Emerging markets need to improve their governance mechanisms while lifting the ban on short selling [6]. Not only in the Chinese market, but the entire capital market is still exploring the regulation of short-selling and the development of related rules.…”

Section: Information Disclosure Problemmentioning

confidence: 99%

The Development and Problems of the Chinese Market Short Selling System

Zhang¹

2022

HBEM

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This paper focuses on the short-selling mechanism in the Chinese capital market, which is not fully mature at this stage, and firstly explores the current development of its shorting behavior and related activities to show its impact on the market operation. Secondly, it analyzes important development issues such as low shorting activity, lagging shorting development process, and information disclosure. Research finds that the lag of shorting activities in the Chinese market is mainly due to the limited availability of underlying assets and the degree of information disclosure directly affects the activity of shorting. Overall, this paper has implications for the development of short selling in China's capital market and suggests constructive ways to improve the short selling mechanism in China's market and even in emerging markets.

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“…In the context of short selling, the negative information about financially constrained corporations will be absorbed into stock prices more quickly, thus increasing the attention of investors and regulators and reducing opportunities for fraudulent behaviour. Therefore, short selling provides supplemental monitoring power to the capital market and regulates the behaviour of financially constrained corporations (Deng & Gao, 2018; Jiang & Chen, 2019). These factors make the costs of fraud outweigh its benefits, and decrease the incentives and opportunities for financially constrained corporations to commit fraud.…”

Section: Theory and Hypothesis Developmentmentioning

confidence: 99%

Financial constraints, short selling and corporate fraud: Evidence from China

Cao

Geng

Zhang

et al. 2022

Australian Economic Papers

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This study investigates the relationship between financial constraints and corporate fraud commission and its detection and the moderating role of short selling using a partial observable bivariate probit model. First, financially constrained corporations are more likely to commit fraud and their fraudulent behaviours are less likely to be detected. Second, short selling has an interesting effect on corporate fraud. On the one hand, short selling has a direct restraining effect on corporate fraud commission and increases the likelihood of corporate fraud detection. On the other hand, short selling plays a moderating role in the relationship between financial constraints and corporate fraud. This study contributes to the corporate fraud literature by analysing the factors influencing corporate fraud and provides theoretical support for regulators and managers in monitoring fraudulent behaviour.

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The monitoring of short selling: Evidence from China

Cited by 28 publications

References 26 publications

Short-Selling and Financial Performance of SMEs in China: The Mediating Role of CSR Performance

Short-Selling and Financial Performance of SMEs in China: The Mediating Role of CSR Performance

The Development and Problems of the Chinese Market Short Selling System

Financial constraints, short selling and corporate fraud: Evidence from China

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