The Effect of Short Sale Restrictions on Corporate Managers
42 Pages Posted: 8 Dec 2020 Last revised: 8 Nov 2023
Date Written: December 28, 2020
Abstract
This paper studies the effect of short selling on corporate managers from 2002 through 2010. We examine how the exemption of short sale uptick tests due to the Regulation SHO pilot program affects managers’ decisions to abandon value-reducing acquisition attempts. We find that when deciding whether to abandon value-reducing acquisition attempts during the program, managers of pilot firms, whose stocks are less subject to short selling impediments, are more sensitive to stock price changes than managers of nonpilot firms. We find no difference in managers’ sensitivity prior to nor post SHO. These results indicate that, despite their dislike of short sellers, managers believe that the level of informativeness from capital markets is superior when short sellers are less impeded.
Keywords: Short Sale Restrictions, Short Selling, Regulation SHO, Pilot Program
JEL Classification: G14, G18, G30, G34
Suggested Citation: Suggested Citation