Short Selling and Firm Investment Efficiency

47 Pages Posted: 16 Apr 2021 Last revised: 1 Sep 2021

See all articles by Chang Yu

Chang Yu

Victoria University of Wellington

Date Written: December 1, 2019

Abstract

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

Yu, Chang, Short Selling and Firm Investment Efficiency (December 1, 2019). Available at SSRN: https://ssrn.com/abstract=3819033 or http://dx.doi.org/10.2139/ssrn.3819033

Chang Yu (Contact Author)

Victoria University of Wellington ( email )

P.O. Box 600
Wellington, 6140
New Zealand
+64 272187510 (Phone)

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