Abstract

http://ssrn.com/abstract=2286818
 


 



Short Selling and Earnings Management: A Controlled Experiment


Vivian W. Fang


University of Minnesota - Twin Cities - Department of Accounting

Allen Huang


Hong Kong University of Science and Technology - Department of Accounting

Jonathan M. Karpoff


University of Washington - Michael G. Foster School of Business

April 25, 2014


Abstract:     
During 2005-2007, the SEC ordered a pilot program in which one-third of the Russell 3000 were arbitrarily chosen as pilot stocks and exempted from short-sale price tests. Pilot firms’ discretionary accruals decrease during this period, and revert to pre-experiment levels when the program ends. Among firms that initiate financial misconduct before the program begins, pilot firms are caught more quickly once the program starts. During the program, pilot firms’ current returns better reflect future earnings, and their post-earnings announcement drift decreases. We conclude that decreases in short selling costs constrain firms’ opportunistic reporting behavior and enhance stock price efficiency.

Number of Pages in PDF File: 56

Keywords: Regulation SHO, Pilot Program, Short Selling, Earnings Management, Price Efficiency

JEL Classification: G14, G18, G34, M41

working papers series


Download This Paper

Date posted: June 29, 2013 ; Last revised: September 9, 2014

Suggested Citation

Fang, Vivian W. and Huang, Allen and Karpoff, Jonathan M., Short Selling and Earnings Management: A Controlled Experiment (April 25, 2014). Available at SSRN: http://ssrn.com/abstract=2286818 or http://dx.doi.org/10.2139/ssrn.2286818

Contact Information

Vivian W. Fang
University of Minnesota - Twin Cities - Department of Accounting ( email )
321 19th Avenue South
Room 3-109
Minneapolis, MN 55455
United States
Allen Huang
Hong Kong University of Science and Technology - Department of Accounting ( email )
LSK Business School Building
HKUST
Clear Water Bay, Kowloon
Hong Kong
+852-23587559 (Phone)
HOME PAGE: http://www.AllenHuang.org
Jonathan M. Karpoff (Contact Author)
University of Washington - Michael G. Foster School of Business ( email )
Box 353200
Seattle, WA 98195-3200
United States
206-685-4954 (Phone)
206-221-6856 (Fax)
Feedback to SSRN


Paper statistics
Abstract Views: 1,629
Downloads: 418
Download Rank: 38,559

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo7 in 0.485 seconds