The impact of short selling on dividend smoothing

Bill B. Francis, Gilna Samuel and Qiang Wu

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

Abstract: We examine the impact of stock-price formation process on firms’ dividend smoothing using Regulation SHO. We find that pilot firms are more likely to increase dividends and less likely to omit them during the pilot program; however, they are more likely to decrease dividends after the program ends. These firms also smooth less and have higher adjustment speeds. Our findings are more pronounced for firms with higher information asymmetry, stronger financials, and weaker governance. In general, this study shows that financial markets tend to have a significant and long-lasting impact on dividend smoothing policy.

Keywords: Short selling; Payout policy; Regulation SHO; Signaling; Smoothing (search for similar items in EconPapers)
JEL-codes: G35 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:65:y:2023:i:c:s1572308923000177

DOI: 10.1016/j.jfs.2023.101117

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