Short Selling Surrounding Data Breach Announcements

40 Pages Posted: 9 Apr 2020 Last revised: 1 May 2020

See all articles by Heng Emily Wang

Heng Emily Wang

Oklahoma State University, Spears School of Business

Qin Emma Wang

Oklahoma State University - Tulsa

Wentao Wu

Clarkson University

Date Written: April 30, 2020

Abstract

This study examines whether short sellers detect rm-level data breaches. Using the datasets of proprietary daily lending and unique data breach announcements, we investigate whether short selling anticipates corporate data breaches, and whether the short selling ex-ante would bene fit investors by improving market quality and price discovery. First, we document that the level of short selling constraints when data breaches are publicly revealed. Both borrowing cost and utilization fee jump. Second, the results of event studies report significantly negative cumulative abnormal returns (CARs) around data breach announcements. Third, on a cross-sectional basis, short-selling activities predict the post-event CARs. Further, we provide evidence that short-selling activities improve market quality and price discovery. Overall, our study provides strong evidence that short sellers exploit prior knowledge of data breaches and help to improve overall market quality.

Keywords: informed trading, short selling, data breach, cumulative abnormal returns (CARs), market quality, price discovery

JEL Classification: G14, K24

Suggested Citation

Wang, Heng and Wang, Qin Emma and Wu, Wentao, Short Selling Surrounding Data Breach Announcements (April 30, 2020). Available at SSRN: https://ssrn.com/abstract=3554487 or http://dx.doi.org/10.2139/ssrn.3554487

Heng Wang (Contact Author)

Oklahoma State University, Spears School of Business ( email )

Stillwater, OK
United States

Qin Emma Wang

Oklahoma State University - Tulsa ( email )

Department of Finance
461 Business Building
Stillwater, OK 74078
United States
918-594-8394 (Phone)
918-594-8281 (Fax)

HOME PAGE: http://business.okstate.edu/directory/694480.html

Wentao Wu

Clarkson University ( email )

United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
46
Abstract Views
323
PlumX Metrics