Article
The Real Effects of Short-Selling Constraints
Review of Financial Studies
(2015)
Abstract
We use a regulatory experiment (Regulation SHO) that relaxes short-selling constraints on a random sample of U.S. stocks to test whether capital market frictions have an effect on stock prices and corporate decisions. We find that an increase in short-selling activity causes prices to fall, and that small firms react to these lower prices by reducing equity issues and investment. These results not only provide evidence that short-selling constraints affect asset prices, but also confirm that short-selling activity has a causal impact on financing and investment decisions.
Publication Date
June 1, 2015
DOI
10.2139/ssrn.1959615
Publisher Statement
Gustavo Grullon, Sébastien Michenaud, James P. Weston, The Real Effects of Short-Selling Constraints, The Review of Financial Studies, Volume 28, Issue 6, June 2015, Pages 1737–1767, https://doi.org/10.1093/rfs/hhv013
Citation Information
Gustavo Grullon, Sébastien Michenaud and James P. Weston. "The Real Effects of Short-Selling Constraints" Review of Financial Studies Vol. 28 Iss. 6 (2015) p. 1737 - 1767 ISSN: 0893-9454 Available at: http://works.bepress.com/sbastien-michenaud/9/