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Short-Selling and Information Arrival around Earnings Announcements: Evidence from Regulation SHO

journal contribution
posted on 2022-10-06, 03:45 authored by Greg ClinchGreg Clinch, Wei Li
ABSTRACT
Short sellers assist in impounding negative news more quickly into stock prices and improve price informativeness. However, there is a lack of consistent evidence about whether short sellers trade predominantly in anticipation of, or in response to, a public information release. To shed light on this question, we exploit Reg SHO, which reduced the constraints faced by short sellers for a subsample of U.S. firms, to examine price informativeness before, during, and after earnings announcements. We show that relative to control firms, pilot firms have greater (less) price informativeness before (during) earnings announcements, suggesting that short sellers trade in anticipation of public earnings news, rather than in response to the public news.
Data Availability: Data are available from the public sources cited in the text.
JEL Classifications: M40; M41; M48.

History

Journal

The Accounting Review

Volume

97

Pagination

237 - 258

ISSN

0001-4826

eISSN

1558-7967

Language

en

Publication classification

C1 Refereed article in a scholarly journal

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