Short selling, managerial alignment and corporate misconduct

Jiefei Yang, Yi Xue and Yitong Liu

Pacific-Basin Finance Journal, 2023, vol. 77, issue C

Abstract: This article investigates the causal relationship between the potential short selling and corporate misconduct in China. We document that short selling can significantly reduce corporate misconduct, such disciplining effect of short selling is more pronounced in non-state-owned enterprises. Shareholders are better disciplined to reduce misbehaviors and incentivize managers to mitigate the adverse effects of short selling when firms face high financial constraints or have stock rights pledged, particularly in non-SOEs. In SOEs where the primary objective is social welfare maximization, shareholders are better incentivized to mitigate the adverse effect of short selling when the CSR performance is lower, whereas managers are less disciplined either when CSR is higher or lower. Managers could be better incentivized to reduce misbehaviors when facing the threat of short selling if their compensation is highly marked to market performance.

Keywords: Short selling; Corporate misconduct; Managerial alignment; State-owned enterprises (search for similar items in EconPapers)
JEL-codes: G18 G38 L20 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927538X22001901
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:77:y:2023:i:c:s0927538x22001901

DOI: 10.1016/j.pacfin.2022.101895

Access Statistics for this article

Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee

More articles in Pacific-Basin Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().