Publication Type

Journal Article

Publication Date

9-2013

Abstract

We study the behavior of short sellers as informed market participants and examine potential sources of their information. Using a newly available dataset with high-frequency short sales data, we find evidence of significant increases in short sales immediately prior to large insider sales, but not prior to small insider sales. We examine a number of explanations that the increase in short sales is driven by public information, either about the firm or about the impending insider sale. The evidence is inconsistent with these explanations, but is consistent with front-running facilitated by leaked information. The front-running appears to be concentrated in firms with poor accounting quality, suggesting that information about a large insider sale reinforces short sellers’ adverse opinion about firm value when accounting quality is poor.

Keywords

Short Selling, Insider Sales, Front Running, Information Leakage

Discipline

Business Administration, Management, and Operations | Sales and Merchandising

Research Areas

Financial Performance Analysis

Publication

Accounting Review

Volume

88

Issue

5

First Page

1

Last Page

46

ISSN

0001-4826

Identifier

10.2308/accr-50485

Publisher

American Accounting Association

Additional URL

https://doi.org/10.2308/accr-50485

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