Short selling and enterprise digital Transformation-A quasi-natural experiment based on financing and funding in China

Haomin Zhang, Jing Song, Yu Song and Haixia Mai

International Review of Economics & Finance, 2025, vol. 102, issue C

Abstract: This paper investigates the impact of short selling on the enterprise digital transformation in China's capital market. Our analysis of A-share listed firms (2007–2023) finds that short selling exerts a significant positive impact on enterprise digital transformation. The robustness of this association is substantiated through a difference-in-differences (DID) estimation strategy, demonstrating a statistically significant increase in the treatment effect coefficient (e.g., β = 0.114 VS β = 0.066, p < 0.01). We further observe two moderating effects on the relationship between short selling and enterprise digital transformation: absorptive capacity (β = 0.749, p < 0.01) and management equity incentives (β = 0.413, p < 0.01). These findings withstand multiple robustness tests, including alternative model specifications, variable measurements, and sample periods. We further find that short selling introduction positively relates to higher TobinQ values (β = 0.058, p < 0.01), with enterprise digital transformation mediating this effect as demonstrated through structural equation modeling.

Keywords: Short selling; Enterprise digital transformation; Absorption capacity; Management equity incentive (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:102:y:2025:i:c:s105905602500471x

DOI: 10.1016/j.iref.2025.104308

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