Short Selling and Firm Investment Efficiency
47 Pages Posted: 16 Apr 2021 Last revised: 1 Sep 2021
Date Written: December 1, 2019
This paper investigates the informativeness of short sales on detecting firm investment inefficiency,
finding that short sellers adjust their short positions before the announcement of a financial statement, to use their information advantage on firm investment inefficiency. The relation between the short positions in a firm and its future investment inefficiency is both statistically and economically significant, and robust to a broad set of control variables. Subsample analysis shows that the informativeness of short sales positions about future investment inefficiency is concentrated on firms with little board independence and firms with low CEO incentive pay.
Keywords: Short selling, Investment efficiency. Capital investment, Corporate governance
JEL Classification: G14; G31
Suggested Citation: Suggested Citation