The Impact of Short-Selling Pressure on Corporate Employee Relations
54 Pages Posted: 14 Aug 2017 Last revised: 12 Jun 2020
Date Written: September 1, 2016
We show that randomly-selected Regulation SHO pilot firms respond to an increased threat of short selling by significantly improving their employee relations. Pilot firms enhance employee security to reduce the likelihood of employee-related negative publicity. The reduction of workplace concerns is most evident among pilot firms with higher degree of earnings manipulation, short interest potential, likelihood of labor disputes and employee whistle-blowing. Pilot firms experience better stock performance during the post Reg-SHO period after easing workplace concerns. Overall, our study provides novel evidence that the removal of short-selling constraints has a real effect on labor relations.
Keywords: Employee relations; Labor disputes; Short-selling; Regulation SHO
JEL Classification: G14; G32; J24; M51
Suggested Citation: Suggested Citation