 Short sales constraints and price adjustments to earnings announcements: Evidence from the Hong Kong marketMin Bai () and Yafeng Qin () International Review of Financial Analysis, 2015, vol. 42, issue C, 304-315 Abstract: This study examines how short sales constraints affect the stock price adjustment to the release of public information in the Hong Kong Stock Exchange. Using a unique feature of this market that allows us to directly investigate the impact of short sales restriction, we find the following. First, non-shortable stocks react more strongly to the publication of negative information than shortable stocks do. Second, non-shortable stocks are overpriced before negative earnings announcements. Hence, part of the strong market reaction of non-shortable stocks on announcement day could be due to the correction of such overpricing. Third, the prices of non-shortable stocks reverse following the announcement of negative information, suggesting that investors overreact to negative information on announcement day. Fourth, it takes longer for the prices of non-shortable stocks to adjust to negative earnings information. On the whole, our results support the research that finds short sales restrictions reduce the efficiency of stock markets. Keywords: Short sales constraints; Earnings announcement; Post-event analysis (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:42:y:2015:i:c:p:304-315 DOI: 10.1016/j.irfa.2015.08.006 Access Statistics for this article International Review of Financial Analysis is currently edited by B.M. Lucey More articles in International Review of Financial Analysis from Elsevier |
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