Abstract

http://ssrn.com/abstract=2296992
 


 



Short-Sale Constraints and Default Prediction around the World


Mark G. Maffett


University of Chicago - Booth School of Business

Edward L. Owens


Emory University - Department of Accounting

Anand Srinivasan


National University of Singapore - Department of Finance

December 29, 2014


Abstract:     
Default prediction is more accurate in countries where short selling is less constrained. However, when economic uncertainty is high, more non-defaulting firms are incorrectly classified as likely to default in these countries. Non-equity-market-based sources of default-risk information improve the accuracy of default prediction, particularly where short selling is more constrained. Short-sale constraints are associated with higher credit spreads, suggesting that the net effect of constraining short selling is a decrease in the availability of default-risk-relevant information and less efficient resource allocation through credit markets.

Number of Pages in PDF File: 40

Keywords: default prediction, short selling constraints, financial reporting transparency

JEL Classification: G14, G15, G33, G38, M41

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Date posted: July 23, 2013 ; Last revised: December 30, 2014

Suggested Citation

Maffett, Mark G. and Owens, Edward L. and Srinivasan, Anand, Short-Sale Constraints and Default Prediction around the World (December 29, 2014). Available at SSRN: http://ssrn.com/abstract=2296992 or http://dx.doi.org/10.2139/ssrn.2296992

Contact Information

Mark G. Maffett (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Chicago Booth School of Business Logo

Edward L. Owens
Emory University - Department of Accounting ( email )
Goizueta Business School
1300 Clifton Road
Atlanta, GA 30322
United States
Anand Srinivasan
National University of Singapore - Department of Finance ( email )
Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore
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