Publication Type
Journal Article
Publication Date
1-2015
Abstract
Using a natural experiment (Regulation SHO), we show that short selling pressure and consequent stock price behavior have a causal effect on managers' voluntary disclosure choices. Specifically, we find that managers respond to a positive exogenous shock to short selling pressure and price sensitivity to bad news by reducing the precision of bad news forecasts. This finding on management forecasts appears to be generalizable to other corporate disclosures. In particular, we find that, in response to increased short selling pressure, managers also reduce the readability (or increase the fuzziness) of bad news annual reports. Overall, our results suggest that maintaining the current level of stock prices is an important consideration in managers' strategic disclosure decisions.
Keywords
Regulation SHO, short selling, corporate disclosure, forecast precision, annual report readability, managerial incentives
Discipline
Accounting | Corporate Finance
Research Areas
Corporate Reporting and Disclosure
Publication
Journal of Accounting Research
Volume
53
Issue
1
First Page
79
Last Page
117
ISSN
0021-8456
Identifier
10.1111/1475-679X.12068
Publisher
Wiley: 24 months - No Online Open
Citation
LI, Yinghua and ZHANG, Liandong.
Short selling pressure, stock price behavior, and management forecast precision: Evidence from a natural experiment. (2015). Journal of Accounting Research. 53, (1), 79-117.
Available at: https://ink.library.smu.edu.sg/soa_research/1700
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
http://doi.org/10.1111/1475-679X.12068