Do Short Sellers Cause CEOs to Be Fired? Evidence from a Randomized Experiment

Benjamin Bennett and Zexi Wang
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Benjamin Bennett: Ohio State University
Zexi Wang: University of Bern

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: We study the short-selling effect on forced CEO turnover. Using difference-in-differences analyses based on the SEC Regulation SHO Pilot Program, we find short selling increases the likelihood of forced turnover. Theories suggest two potential mechanisms: informed short sellers reveal negative information (Revelation), while uninformed short sellers manipulate prices (Manipulation). Consistent with Revelation, we find stronger effects when firms have more earnings management, less informative stock prices, and less competitive product markets. Consistent with Manipulation, we find stronger effects when firms have more growth opportunities, fewer blockholders, and less volatile stock. Manipulative short selling decreases the efficiency of forced turnover.

JEL-codes: G30 G34 (search for similar items in EconPapers)
Date: 2018-03
New Economics Papers: this item is included in nep-cfn and nep-exp
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2018-06

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