Do Managers Learn from Short Sellers? Evidence from Corporate Acquisitions

42 Pages Posted: 8 Dec 2020 Last revised: 5 May 2022

See all articles by Baixiao Liu

Baixiao Liu

Peking University HSBC Business School

John J. McConnell

Purdue University

Andrew Schrowang

Florida State University - Department of Finance

Date Written: December 28, 2020

Abstract

We examine how the exemption of short sale uptick tests due to the Regulation SHO pilot program affects managers’ decisions to abandon value-reducing acquisition attempts. We find that when deciding whether to abandon value-reducing acquisition attempts during the program, managers of pilot firms, whose stocks are less subject to short selling impediments, are more sensitive to stock price changes than managers of nonpilot firms. We find no difference in managers’ sensitivity prior to nor post the program. These results indicate that, despite managers’ repugnance toward short sellers, they learn more from stock price changes when short sellers are less impeded.

Keywords: Corporate Acquisition, Short Selling, Regulation SHO, Pilot Program

JEL Classification: G14, G18, G30, G34

Suggested Citation

Liu, Baixiao and McConnell, John J. and Schrowang, Andrew, Do Managers Learn from Short Sellers? Evidence from Corporate Acquisitions (December 28, 2020). Available at SSRN: https://ssrn.com/abstract=3732939 or http://dx.doi.org/10.2139/ssrn.3732939

Baixiao Liu (Contact Author)

Peking University HSBC Business School ( email )

John J. McConnell

Purdue University ( email )

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Andrew Schrowang

Florida State University - Department of Finance ( email )

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