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The Effect of Short-Selling on Information Arrival around Earnings Announcements: Evidence from Regulation SHO
|Title:||The Effect of Short-Selling on Information Arrival around Earnings Announcements: Evidence from Regulation SHO|
|Date Issued:||20 Aug 2018|
|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 when and how short-sellers acquire an information advantage – i.e., private vs. public channels, and incorporate such information into their trading activities. To shed light on these questions, I exploit Reg SHO to examine price informativeness before, during and after earnings announcements. I show that relative to control firms, pilot firms have greater (less) price informativeness before (during) earnings announcements, suggesting that short-sellers are informed via the private channel and that the segment of short-sellers that trade on earnings news is populated predominantly by those who acquire private information prior to earnings releases. I also find that the main results are more pronounced for a sub-sample comprised of firms with low corporate transparency, relative to a sub-sample with high corporate transparency.|
|Appears in Collections:||
12 Financial: Financial reporting quality/Earnings smoothing|
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