An Empirical Examination of the Relationship between Naked Shorting and Share Prices Around the Announcement of a Firm’s Need for External Capital

44 Pages Posted: 5 Apr 2010 Last revised: 1 Sep 2010

See all articles by Austin Murphy

Austin Murphy

Oakland University - School of Business Administration

Hong Qian

Oakland University - Department of Accounting and Finance

Yun Ellen Zhu

Oakland University

Date Written: June 1, 2010

Abstract

This research finds empirical evidence that naked short sales contribute to the ability of investors to manipulatively short down the value of firms in need of external capital. The findings are also consistent with a hypothesis that the announcement effect of a new stock issue is merely a proxy for the value dilution of shorting shares of companies needing to raise new equity.

Suggested Citation

Murphy, J. Austin and Qian, Hong and Zhu, Yun Ellen, An Empirical Examination of the Relationship between Naked Shorting and Share Prices Around the Announcement of a Firm’s Need for External Capital (June 1, 2010). Available at SSRN: https://ssrn.com/abstract=1583108 or http://dx.doi.org/10.2139/ssrn.1583108

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)

Hong Qian

Oakland University - Department of Accounting and Finance ( email )

347 Elliott Hall
275 Varner Dr.
Rochester, MI 48309
United States

Yun Ellen Zhu

Oakland University ( email )

419 Elliott Hall
Rochester, MI 48309-4401
United States

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