Did subsidiary's participation in paycheck protection program affect public parent company? Evidence from short selling

Yaqi Wu, Long Liu and Si Shen

Economics Letters, 2024, vol. 241, issue C

Abstract: We examine short sellers’ responses to subsidiaries’ participation in the Paycheck Protection Program (PPP). The PPP program is intended to maintain small businesses’ payroll and salary levels. Using the daily short sale volume data from FINRA, we find that short sellers respond to PPP loan announcements. Event study indicates that abnormal short sales peak on the 2nd day after PPP loan announcement. Further regression analysis shows that short sellers short more shares around loan announcement during the 2nd round PPP program. Our findings are supported by the stock returns analysis in Cororaton and Rosen (2021). Overall, we find that short sellers trade on subsidiary's participation of PPP and possess a negative view of 2nd round borrowing.

Keywords: Paycheck protection program; Subsidiary company; Parent company; Short selling; Event study (search for similar items in EconPapers)
JEL-codes: G14 G21 G28 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:241:y:2024:i:c:s0165176524002751

DOI: 10.1016/j.econlet.2024.111791

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