The impact of margin trading and short selling on the investment-to-price sensitivity. Evidence from China

Apostolos Dasilas

International Review of Financial Analysis, 2022, vol. 84, issue C

Abstract: Employing a database of seven successive short-selling and margin trading ban lifts in the Chinese stock markets during the period 2010–2020, I investigate the impact of leveraged trading transactions on the investment-to-price sensitivity. I also examine whether stock liquidity and institutional shareholdings affect the investment sensitivity subsequent to the lift of short-selling and margin trading constraints. The results from the panel data regression analysis show that lifting bans lead to less corporate investment and a decrease of the investment-to-price sensitivity between 0.29% and 0.44%. Moreover, the regression results reveal that the investment-to-price sensitivity is stronger for more liquid stocks, while the proportion of institutional shareholdings does not affect significantly the corporate investment sensitivity.

Keywords: Margin trading; Short selling; Investment sensitivity; Liquidity; Institutional shareholdings (search for similar items in EconPapers)
JEL-codes: G18 G31 G32 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:84:y:2022:i:c:s1057521922003635

DOI: 10.1016/j.irfa.2022.102413

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