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Short selling constraints and politically motivated negative information suppression

journal contribution
posted on 2023-05-20, 22:37 authored by Deng, W, Jiang, C, Young, D
This study examines the effect of short selling constraints on politically motivated suppression of negative information. We use a unique setting in China, in which there are multiple exogenous changes in short selling constraints and firms have strong incentives to suppress negative information during politically sensitive periods. Results from Difference-in-Differences analyses and a regression discontinuity design show that removing short selling constraints can reduce politically motivated bad news suppression. Short selling can reduce negative information suppression through the channel of improved financial reporting quality, more management’s voluntary disclosure, and media’s more timely release of information. In addition, the effect of short selling on reducing bad news hoarding is more pronounced for more politically sensitive meetings and for state-owned firms located in regions with weaker market and institutional development.

History

Publication title

Journal of Corporate Finance

Volume

68

Issue

31 March 2021

Article number

101943

Number

101943

Pagination

1-19

ISSN

0929-1199

Department/School

TSBE

Publisher

Elsevier Science Bv

Place of publication

Po Box 211, Amsterdam, Netherlands, 1000 Ae

Rights statement

Copyright 2021 Elsevier B.V. All rights reserved.

Repository Status

  • Restricted

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