Abstract

http://ssrn.com/abstract=2380352
 


 



SHO Time for Innovation: The Real Effects of Short Sellers


Jie He


University of Georgia - Department of Finance

Xuan Tian


Indiana University - Kelley School of Business - Department of Finance

June 16, 2016

The 2016 American Finance Association Meetings Paper

Abstract:     
We examine the real effect of financial markets by analyzing how short sellers affect firm innovation. Using exogenous variation in short-selling costs generated by a quasi-natural experiment, Regulation SHO, which randomly assigns a subsample of Russell-3000 firms into a pilot program and removes the tick restriction on their stocks, we show that short sellers appear to have a positive, causal effect on the quality, efficiency, and originality of corporate innovation. The exposure to patenting-related litigation initiated by short sellers is a plausible mechanism through which short sellers affect firms’ innovative activities. Our paper provides new insights into an unintended real effect of short sellers – their improvement of technological innovation.

Number of Pages in PDF File: 49

Keywords: Innovation, Short selling, Regulation SHO, Pilot program, Litigation risk

JEL Classification: G14, G18, O31, O32


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Date posted: January 18, 2014 ; Last revised: June 19, 2016

Suggested Citation

He, Jie and Tian, Xuan, SHO Time for Innovation: The Real Effects of Short Sellers (June 16, 2016). The 2016 American Finance Association Meetings Paper. Available at SSRN: http://ssrn.com/abstract=2380352 or http://dx.doi.org/10.2139/ssrn.2380352

Contact Information

Jie He (Contact Author)
University of Georgia - Department of Finance ( email )
424 Brooks Hall
Terry College of Business, University of Georgia
Athens, GA 30602-6253
United States
Xuan Tian
Indiana University - Kelley School of Business - Department of Finance ( email )
1309 E. Tenth Street
Bloomington, IN 47405
United States
812-8553420 (Phone)
824-8555875 (Fax)
HOME PAGE: http://kelley.iu.edu/tianx

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