Insider Sales under the Threat of Short Sellers: New Hypothesis and New Tests
Finance and Financial Management
short selling
Accounting
0502 economics and business
05 social sciences
Regulation SHO
disciplining hypothesis
insider trading
crowding-out hypothesis
004
DOI:
10.2308/tar-2018-0196
Publication Date:
2021-03-24T23:08:49Z
AUTHORS (5)
ABSTRACT
ABSTRACT
Using the Regulation SHO program as a quasi-experiment, we document that the threat of short selling has a negative effect on the volume of opportunistic insider selling and a positive effect on its profitability for each transaction. These effects are stronger among firms with higher litigation risk, greater media coverage, and executives who have more of their firms' stock-related holdings. We further find robust evidence when we extend the analyses to short selling deregulations in the Chinese and Hong Kong stock exchanges. Overall, our findings suggest that short sellers play a disciplinary role in opportunistic insider selling.
Data Availability: Data are available from the public sources cited in the text.
JEL Classifications: D8; D53; G14; G18.
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