Short Sellers and Financial Misrepresentation
Using a unique dataset composed of 632 firms targeted by SEC enforcement actions for financial misrepresentation in 1988-2005 and a matching control sample, I document several findings that are consistent with the view that short sellers can help expose financial misrepresentation and other investors can potentially benefit from short sellers actions. First, one and a half years before the revelation of misconduct, short sellers start building their positions in these firms. Moreover, the positions are larger for firms that are later found to have more severe misconduct. Second, misrepresentation in firms more heavily shorted is discovered earlier than in firms with lower short interest. Third, inconsistent with the prediction of the uninformed and manipulative investors hypothesis, short-selling activity has no impact on how much the market penalizes the misconduct, after controlling for the severity of misconduct. There is evidence that the total wealth loss for investors who buy stocks at inated prices is smaller if the stock becomes heavily shorted after the violation starts. These results enhance our understanding of the role of short sellers and have important implications for the regulation of short-selling activity.
国际会议
大连
英文
1-66
2008-07-02（万方平台首次上网日期，不代表论文的发表时间）