Flying under the radar: The effects of short-sale disclosure rules on investor behavior and stock prices

Stephan Jank, Christoph Roling and Esad Smajlbegovic

Journal of Financial Economics, 2021, vol. 139, issue 1, 209-233

Abstract: We study how disclosure requirements for large short positions affect investor behavior and security prices. Short positions accumulate just below the applicable disclosure threshold as certain investors never disclose any of their positions. Further tests suggest that this secrecy is part of investors’ general policy of avoiding disclosure to protect their unique, profitable investment strategies against reverse engineering by competitors. No evidence supports the notion that short sellers avoid disclosure because of potential adverse effects on securities' lending fees, risk of recall, or short squeezes. Finally, the evasive behavior by short sellers in response to transparency regulations hampers price discovery.

Keywords: Information disclosure; Short selling; Investor behavior; Limits to arbitrage; Price discovery (search for similar items in EconPapers)
JEL-codes: G14 G15 G23 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Working Paper: Flying under the radar: The effects of short-sale disclosure rules on investor behavior and stock prices (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:139:y:2021:i:1:p:209-233

DOI: 10.1016/j.jfineco.2020.07.010

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