TY - JOUR
T1 - Short selling pressure, stock price behavior, and management forecast precision
T2 - Evidence from a natural experiment
AU - Li, Yinghua
AU - Zhang, Liandong
N1 - Publisher Copyright:
©, University of Chicago on behalf of the Accounting Research Center, 2014.
PY - 2015/3/1
Y1 - 2015/3/1
N2 - 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.
AB - 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.
KW - Annual report readability
KW - Corporate disclosure
KW - Forecast precision
KW - Managerial incentives
KW - Regulation SHO
KW - Short selling
UR - http://www.scopus.com/inward/record.url?scp=84923528906&partnerID=8YFLogxK
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U2 - 10.1111/1475-679X.12068
DO - 10.1111/1475-679X.12068
M3 - Article
AN - SCOPUS:84923528906
SN - 0021-8456
VL - 53
SP - 79
EP - 117
JO - Journal of Accounting Research
JF - Journal of Accounting Research
IS - 1
ER -