Publication Type

Journal Article

Version

publishedVersion

Publication Date

5-2022

Abstract

We examine the impact of short sellers on insider trading profitability using a natural experiment of a pilot program which relaxed short-selling constraints for randomly selected pilot stocks. We find that pilot firms experienced a significant decrease in insider trading profitability during the pilot program. The results are more pronounced for the pilot firms with poor information quality, and for the pilot firms without corporate restrictions on insider trading. Our evidence suggests that short sellers serve an important market disciplinary role by reducing insider trading profitability.

Keywords

Short sellers, Insider trading, Government regulation

Discipline

Accounting | Portfolio and Security Analysis

Research Areas

Corporate Reporting and Disclosure

Publication

Journal of Accounting and Public Policy

Volume

41

Issue

3

First Page

1

Last Page

19

ISSN

0278-4254

Identifier

10.1016/j.jaccpubpol.2021.106936

Publisher

Elsevier

Copyright Owner and License

Publisher

Additional URL

https://doi.org/10.1016/j.jaccpubpol.2021.106936

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