Business Commons^™

Short Sellers And Corporate Disclosures, Qiang Cheng, Xia Chen, Ting Luo, Heng Yue

Research Collection School Of Accountancy

We examine how short sellers affect corporate disclosures using a natural experiment. From May 2005 to July 2007, the SEC implemented a pilot program by randomly selecting one third of Russell 3000 stocks and removing the short sale price tests for these stocks (referred to as pilot firms), leading to lower short-selling constraint, without changing the requirement for other firms (referred to as control firms). We compare the change in corporate disclosures between the pilot firms and the control firms during this period. We find that compared to the control firms, the pilot firms are more likely to issue good …