Abstract

http://ssrn.com/abstract=2380352
 


 



Short Sellers and Innovation: Evidence from a Quasi-Natural Experiment


Jie He


University of Georgia - Department of Finance

Xuan Tian


Indiana University - Kelley School of Business - Department of Finance

March 18, 2014


Abstract:     
We examine the causal effect of short sellers on innovation. Using exogenous variation in short-selling costs generated by a quasi-natural experiment, Regulation SHO, which randomly assigns a subsample of the Russell 3000 index firms into a pilot program, we show that short sellers have a positive, causal effect on firm innovation. The positive effect of short sellers on innovation is more pronounced when firms are subject to a larger agency problem and a higher degree of information asymmetry. Our paper provides new insights into an under-explored and possibly unintended real effect of short sellers – their encouragement for firm innovation.

Number of Pages in PDF File: 43

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

JEL Classification: G14, G18, O31, O32

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Date posted: January 18, 2014 ; Last revised: May 14, 2014

Suggested Citation

He, Jie and Tian, Xuan, Short Sellers and Innovation: Evidence from a Quasi-Natural Experiment (March 18, 2014). 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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