Short Sellers and Long-Run Management Forecasts

57 Pages Posted: 24 Jun 2019

See all articles by Xia Chen

Xia Chen

Singapore Management University

Qiang Cheng

Singapore Management University

Ting Luo

Tsinghua University

Heng Yue

Singapore Management University - School of Accountancy

Multiple version iconThere are 2 versions of this paper

Date Written: June 7, 2019

Abstract

We examine how short sellers affect long-run management forecasts using a natural experiment (Regulation SHO) that relaxes short-selling constraints on a group of randomly selected firms (referred to as pilot firms). We find that compared to other firms, the pilot firms issue more long-run good news forecasts but do not change the frequency of long-run bad news forecasts. The increase in good news forecasts is greater when the pilot firms have higher quality forecasts, more uncertainty about firm value, or higher manager equity incentives. Overall, these results and the results of additional analyses indicate that the reduction in short-selling constraints and the increase in short-selling threat induce managers to enhance disclosures through more long-run forecasts, primarily in the case of good news, to discourage short sellers.

Keywords: Short Sales; Corporate Disclosures; Management Forecasts

JEL Classification: G11, G14, M41

Suggested Citation

Chen, Xia and Cheng, Qiang and Luo, Ting and Yue, Heng, Short Sellers and Long-Run Management Forecasts (June 7, 2019). Contemporary Accounting Research, Forthcoming, Singapore Management University School of Accountancy Research Paper No. 2019-98, Available at SSRN: https://ssrn.com/abstract=3405867 or http://dx.doi.org/10.2139/ssrn.3405867

Xia Chen

Singapore Management University ( email )

60 Stamford Rd.
Singapore 178900
Singapore

Qiang Cheng (Contact Author)

Singapore Management University ( email )

60 Stamford Road
Singapore, 178900
Singapore

Ting Luo

Tsinghua University ( email )

Weilun #201,School of Economics and Management
Beijing, 100084
China

Heng Yue

Singapore Management University - School of Accountancy ( email )

60 Stamford Road
Singapore 178900
Singapore

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