Suchergebnisse

AbstractManagers tend to issue equity when a firm is overvalued. Short selling is more frequent among overvalued firms. By conditioning short selling on overvaluation, we show that short selling increases leverage, lenghtens debt maturity, and speeds up adjustment to target leverage. The leverage increase is more pronounced in firms with independent boards and an increased likelihood of misvaluation, is driven by overvaluation relative to long‐run value, and occurs through lower equity issuance and higher long‐term debt issuance. Analyses using the exogenous shock to the short‐selling environment from the US Securities and Exchange's Reg SHO pilot program suggest these results are causal.

"I study battles between short sellers and firms. Firms use a variety of methods to impede short selling, including legal threats, investigations, lawsuits, and various technical actions intended to create a short squeeze. These actions create short sale constraints. Consistent with the hypothesis that short sale constraints allow stocks to be overpriced, firms taking anti-shorting actions have in the subsequent year very low abnormal returns of about -2 percent per month"--National Bureau of Economic Research web site