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

See all articles by Wesley Deng

Wesley Deng

University of New South Wales - UNSW Business School

Vishal K. Gupta

University of Alabama - Department of Management

Marc L. Lipson

University of Virginia - Darden School of Business

Sandra Mortal

University of Alabama - Culverhouse College of Commerce & Business Administration

Date Written: December 13, 2019

Abstract

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

Suggested Citation

Deng, Xiaohu and Gupta, Vishal K. and Lipson, Marc Lars and Mortal, Sandra, Short Sale Constraints and Corporate Investment (December 13, 2019). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming, Available at SSRN: https://ssrn.com/abstract=2782546 or http://dx.doi.org/10.2139/ssrn.2782546

Xiaohu Deng

University of New South Wales - UNSW Business School ( email )

Sydney, NSW 2052
Australia

HOME PAGE: http://wesleydeng.net

Vishal K. Gupta

University of Alabama - Department of Management ( email )

101 Paul W. Bryant Dr.
Box 870382
Tuscaloosa, AL 35487
United States

Marc Lars Lipson (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4837 (Phone)
434-243-5021 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/lipson.htm

Sandra Mortal

University of Alabama - Culverhouse College of Commerce & Business Administration ( email )

Culverhouse College of Business
Tuscaloosa, AL 35487-0223
United States

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