Short Sale Constraints and Corporate Investment
Journal of Financial and Quantitative Analysis (JFQA), Forthcoming
65 Pages Posted: 23 May 2016 Last revised: 22 Apr 2022
Date Written: December 13, 2019
In a sample of non-US regulatory regime shifts we find that expanded short selling is associated with stock price declines, reductions in capital expenditures, and lower asset growth. In a reversal of results found for US stocks in a study of Regulation SHO by Grullon, Michenaud, and Weston (2015), our results are generally stronger for large firms than for small ones. Further results show the investment effect is stronger for firms that previously relied on outside financing. Our results suggest short-sale policies affect corporate investment and that this effect is not driven by capital constraints.
Keywords: Short-sale constraints; Corporate investment; Investment efficiency; Equity mispricing; Asset growth; Capital raising
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