Insider sales under the threat of short sellers: New hypothesis and new tests

Insider sales under the threat of short sellers: New hypothesis and new tests

Using the Regulation SHO program as a quasi-experiment, we document that the threat of short selling has a negative effect on the volume of opportunistic insider selling and a positive effect on its profitability for each transaction. These effects are stronger among firms with higher litigation ris...

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Bibliographic Details
Main Authors: Kemin Wang, WANG, Rencheng, Wei, K. C. John, Zhang, Bohui, Zhou, Yi
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2022
Subjects:
Regulation SHO
short selling
insider trading
disciplining hypothesis
crowding-out hypothesis
Accounting
Finance and Financial Management
Online Access:https://ink.library.smu.edu.sg/soa_research/1925
https://ink.library.smu.edu.sg/context/soa_research/article/2952/viewcontent/paper_635.pdf
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Institution: Singapore Management University
Language: English
Description
Summary:Using the Regulation SHO program as a quasi-experiment, we document that the threat of short selling has a negative effect on the volume of opportunistic insider selling and a positive effect on its profitability for each transaction. These effects are stronger among firms with higher litigation risk, greater media coverage, and executives who have more of their firms' stock-related holdings. We further find robust evidence when we extend the analyses to short selling deregulations in the Chinese and Hong Kong stock exchanges. Overall, our findings suggest that short sellers play a disciplinary role in opportunistic insider selling.

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