Study on the Impact of Short Selling Mechanisms on Corporate Violations

DOI: https://doi.org/10.62517/jel.202614225

Author(s)

Yuxi Huang

Affiliation(s)

Macao University of Science and Technology, Accounting, Zhuhai, China

Abstract

Against the backdrop of China's margin trading system implementation, this study examines the governance effects of short-selling mechanisms on listed companies' non-compliant behavior. Findings indicate that short-selling mechanisms effectively constrain corporate misconduct. Further analysis reveals that financing constraints weaken this governance effect, while the misconduct-suppressing impact of short-selling mechanisms is more pronounced during market downturns and within high-tech industries.

Keywords

Short-Selling Mechanism; Corporate Misconduct; Margin Financing Constraints; Governance Effect

References

[1] Meng Qingbin, Zou Yang, Hou Deshuai. Can Short Selling Mechanisms Curb Listed Companies' Violations? [J]. Economic Research Journal, 2019(06): 89-105. [2] Lei Xiao, Tang Xuesong, Zheng Yuxin. Can Relaxing Short Selling Restrictions Curb Listed Companies' Violations? [J]. Contemporary Finance and Economics, 2019, (04): 119-130. [3] Huang Shunwu, Li Xue. Securities Lending Short Selling and Disclosure Violations: Evidence from a Quasi-Natural Experiment [J]. Journal of Nanjing Audit University, 2022, 19(03):72-81. [4] Zhou Kaiguo, Ying Qianwei, Zhong Chang. Can Media Oversight Serve as External Governance? Evidence from Violations by Chinese Listed Companies [J]. Journal of Finance and Banking, 2016, (6): 193-206. [5] Lennox C., Pittman J. A.. Big Five Audits and Accounting Fraud[J]. Contemporary Accounting Research, 2010, 27(1): 209- 247 [6] Baker M, Wurgler J. Investor sentiment and the cross‐section of stock returns[J]. The journal of Finance,2006,61(4):1645-1680. [7] Qiu Shixun. A Study on the Mechanism of Securities and Futures Market Sentiment Influencing Spot Market Sentiment [D]. Xi'an University of Technology, 2024. [8] Fang Xiaoyu. An Empirical Study on the Relaxation of Short Selling Regulations and the Debt Financing Costs of Chinese Enterprises [D]. Southwestern University of Finance and Economics, 2022. DOI:10.27412/d.cnki.gxncu.2022.002437. [9] Massa M., Zhang B., Zhang H.. The Invisible and of Short Selling: Does Short Selling Discipline Earnings Management?[J]. The Review of Financial Studies, 2015, 28(6): 1701- 1736. [10] Xu, Xixiong; Zhan, Heng; Li, Wanli. Short Selling Mechanisms, Dual Governance, and Corporate Violations: An Empirical Test from a Market-Based Governance Perspective [J]. Research Journal of Finance, 2021, (10): 190-206. [11] Yang Jiefei, Xue Yi. Short Selling Threat, Corporate Financing Expansion Strategy, and Violations [J]. Securities Market Herald, 2020, (04): 41-50.