Abstract

http://ssrn.com/abstract=906425
 
 

References (64)



 
 

Citations (2)



 


 



Shorting Down Value: The Toxic Effect of Insufficient Internal Liquidity


Austin Murphy


Oakland University - School of Business Administration

Joseph H. Callaghan


Oakland University

Mohinder Parkash


Oakland University

June 3, 2006


Abstract:     
Within the context of fundamentally efficient markets, this paper demonstrates analytically how short sellers can put non-transitory downward pressure on the stock market prices and intrinsic values of companies that need to raise external capital because of insufficient internal liquidity. The model presented helps explain anomalous empirical findings in the extant literature on shorting and related issues. Empirical tests are also conducted in this research that provide evidence consistent with the theory. The model's implications yield important normative conclusions that supply justification for the sizable cash reserves held by corporations and their reluctance to raise external capital.

Number of Pages in PDF File: 57

Keywords: Shorting, Liquidity, Distress Valuation

JEL Classification: G12, G33

working papers series


Download This Paper

Date posted: June 6, 2006  

Suggested Citation

Murphy, Austin and Callaghan, Joseph H. and Parkash, Mohinder, Shorting Down Value: The Toxic Effect of Insufficient Internal Liquidity (June 3, 2006). Available at SSRN: http://ssrn.com/abstract=906425 or http://dx.doi.org/10.2139/ssrn.906425

Contact Information

J. Austin Murphy (Contact Author)
Oakland University - School of Business Administration ( email )
Varner Hall - Room 502
Rochester, MI 48309-4401
United States
248-370-2125 (Phone)
248-370-4275 (Fax)
Joseph H. Callaghan
Oakland University ( email )
Rochester, MI 48309-4401
United States
248-370-3538 (Phone)
248-370-4275 (Fax)
HOME PAGE: http://www.sba.oakland.edu/Faculty/Callaghan/index.html
Mohinder Parkash
Oakland University ( email )
Rochester, MI 48309-4401
United States
Feedback to SSRN


Paper statistics
Abstract Views: 839
Downloads: 102
Download Rank: 156,163
References:  64
Citations:  2

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo4 in 0.266 seconds