The Effects of Short Selling Mechanism on Corporate Cash Holding – Evidence in China

17 Pages Posted: 16 Jan 2020

See all articles by Crystal Xiaobei Chen

Crystal Xiaobei Chen

HIT Shenzhen

Qinan He

affiliation not provided to SSRN

Date Written: May 29, 2019

Abstract

Abstract: The short-selling mechanism is an important decision to improve the efficiency of the capital market. China began implementing the short-selling policy in 2010. This paper selects the sample of all A-board listed companies from 2007 to 2016. By comparing the cash holdings of the enterprises that have not joined the short selling policy, it is found that the cash holdings of the enterprises participating in the short selling policy are significantly lower than those without the short selling policy. It is also found that this effect has different effects on enterprises with different characteristics. For enterprises with worse internal governance before participating in the short selling mechanism, the effect of cash holdings reduction is more obvious. Secondly, the effect of the reduction on cash holdings is only significant in the sample group with smaller financing constraints. Finally, in areas with low market level, the short selling policy does not significantly reduce the amount of cash holdings, but in higher market areas, this effect is more significant.

Keywords: short-selling mechanism, cash holdings, internal governance, financing constraints

JEL Classification: G1, G10, G12

Suggested Citation

Chen, Crystal Xiaobei and He, Qinan, The Effects of Short Selling Mechanism on Corporate Cash Holding – Evidence in China (May 29, 2019). Available at SSRN: https://ssrn.com/abstract=3511113 or http://dx.doi.org/10.2139/ssrn.3511113

Crystal Xiaobei Chen (Contact Author)

HIT Shenzhen ( email )

HIT Shenzhen Campus
University Town
Shenzhen, GD
China

Qinan He

affiliation not provided to SSRN

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