When Blockholders Meet Short Sellers: Two Forms of Governance

42 Pages Posted: 15 Mar 2019

See all articles by Michael Wang

Michael Wang

Monash University - Department of Banking and Finance

Jin Yu

Monash University -Department of Banking and Finance

Date Written: November 2018

Abstract

Using a natural experiment of short selling and a unique blockholder dataset from the U.S. market, this paper investigates how short selling affects blockholder governance. Although the size of blockholders is reduced with the high propensity for short selling, blockholders tend to raise more activism events, propose more activism goals to discipline managers, or provide suggestions for business operations. Further analyses reveal that blockholders that choose to stay in the firm with increasing short selling can improve the firm’s value. These detailed purposes of activism lead to better firm performance compared with other active blockholders that focus on investment goals.

Keywords: Short Selling, Blockholder Activism, Passive Blockholders, Firm Performance

JEL Classification: G23, G32, G34

Suggested Citation

Wang, Michael and Yu, Jin, When Blockholders Meet Short Sellers: Two Forms of Governance (November 2018). Available at SSRN: https://ssrn.com/abstract=3341063 or http://dx.doi.org/10.2139/ssrn.3341063

Michael Wang (Contact Author)

Monash University - Department of Banking and Finance ( email )

Melbourne
Australia

Jin Yu

Monash University -Department of Banking and Finance ( email )

Melbourne
Australia
+61 3 99034590 (Phone)

HOME PAGE: http://sites.google.com/site/jinyufinecon/

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