File(s) under permanent embargo
Short selling and future cash flow predictability of capital investment: Evidence from Australia
This study investigates whether short selling, as a market mechanism, has a disciplining function for firms’ investment efficiency, measured through the association between capital investment and future cash flows. Using a sample of large Australian listed firms, we find that short-selling activities improve the positive relationship between capital investment and future cash flow and that this effect is mainly driven by firms with a risk management committee (RMC). Additional analyses show that the disciplining function of short selling for firms’ investment efficiency varies with (i) the level of firms’ financial constraints, (ii) firms’ life cycle or (iii) CEO share incentives. The main results are robust to a batch of endogeneity tests to address the potential self-selection bias and the concern about reverse causality.
History
Publication title
Journal of Contemporary Accounting and EconomicsVolume
17Pagination
1-17ISSN
1815-5669Department/School
TSBEPublisher
Elsevier LtdPlace of publication
United KingdomRights statement
Copyright 2020 Elsevier Ltd. All rights reservedRepository Status
- Restricted