The Impact of Short-Selling Pressure on Corporate Employee Relations

54 Pages Posted: 14 Aug 2017 Last revised: 12 Jun 2020

See all articles by Paul Brockman

Paul Brockman

Lehigh University - College of Business

Juan Luo

University of Adelaide - Business School; Financial Research Network (FIRN)

Limin Xu

University of Adelaide - Business School

Date Written: September 1, 2016

Abstract

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

Brockman, Paul and Luo, Juan and Xu, Limin, The Impact of Short-Selling Pressure on Corporate Employee Relations (September 1, 2016). Journal of Corporate Finance, Forthcoming, 30th Australasian Finance and Banking Conference 2017, Available at SSRN: https://ssrn.com/abstract=3017607 or http://dx.doi.org/10.2139/ssrn.3017607

Paul Brockman

Lehigh University - College of Business ( email )

Bethlehem, PA 18015
United States

Juan Luo (Contact Author)

University of Adelaide - Business School ( email )

10 Pulteney Street
Adelaide, South Australia 5005
Australia
+61 8 8313 0133 (Phone)
+61 8 8223 4782 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Limin Xu

University of Adelaide - Business School ( email )

10 Pulteney Street
Adelaide, South Australia 5005
Australia

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