Daily short selling around reverse stock splits

Benjamin M. Blau, Justin S. Cox, Todd G. Griffith and Ryan Voges

Journal of Financial Markets, 2023, vol. 65, issue C

Abstract: We examine prices and daily short selling activity around reverse stock splits using a difference-in-difference identification strategy. The results show negative returns for treatment stocks, relative to control stocks, around reverse splits. Additionally, short selling increases for treatment stocks vis-à-vis control stocks in the days after the reverse split announcements, but not before. Moreover, short selling on reverse split announcement and effective dates does not appear to contain more information about future negative returns than usual. Together, the results indicate that reverse stock splits attract short sellers’ attention, but that they are no more informed around these events than normal.

Keywords: Short selling; Reverse stock splits; Market efficiency (search for similar items in EconPapers)
JEL-codes: D40 G10 G12 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:65:y:2023:i:c:s1386418123000307

DOI: 10.1016/j.finmar.2023.100832

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