Does External Governance Hinder or Improve Firm Innovation? Evidence from the Short Selling Pressure

This study aims to examine the impact of short selling constraints on corporate social responsibility (CSR) of listed tourism companies in China. Based on the external governance theory, it is hypothesized that short selling deregulation provides a monitoring function on CSR performance of tourism companies, which are highly exposed to social and environmental problems. A multiple linear regression is conducted with a panel data of Chinese 21 listed tourism firms between 2010 and 2018. The descriptive statistics show that average CSR score of Chinese tourism companies is 25.52/100, which represents low CSR performance of tourism industry. The regression results illustrate that short selling constraints relaxation can improve CSR performance of tourism companies. The findings of this study indicate that financial policymakers shall consider further relaxation of short selling constraints, which can be beneficial to industry, such as tourism, that are sensitive to CSR practices and performance.

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The Moderating Effect of Family Business Ownership on the Relationship between Short-Selling Mechanism and Firm Value for Listed Companies in China

Journal of Risk and Financial Management ◽

10.3390/jrfm14060236 ◽

2021 ◽

Vol 14 (6) ◽

pp. 236

Author(s):

Wenzhen Mai ◽

Nik Intan Norhan Binti Abdul Hamid

Keyword(s):

Corporate Governance ◽

Family Business ◽

Value Creation ◽

Firm Value ◽

Panel Data Analysis ◽

Listed Companies ◽

Short Selling ◽

Family Businesses ◽

External Governance ◽

The Relationship

This study demonstrates an investigation of the external corporate governance effect of short selling mechanisms on firm value in the Chinese context. The effect of family businesses is also examined as a moderator of the relationship between short-selling and firm value. Using panel data analysis of Chinese listed companies, this paper tests a total sample of 22,468 firm-year observations from the Shanghai and Shenzhen Stock Exchange from 2009 to 2019 by applying the PSM-DID method in order to mitigate self-selection and endogenous problems caused by the uniqueness of Chinese short selling mechanisms. The findings suggest that both deregulation and the propensity of short selling can improve the firm value. Our findings also established that family ownership weakens firm value with the availability of short-selling, which indicates that family businesses have long orientations and conduct better corporate governance practices than non-family business, as short-selling shows a weaker external governance effect on firm value creation by family businesses in China. A robust test of alternative measurements is conducted and validated. This study provides significant insights for policymakers to consider in order to further relax short-selling constraints, which can act as effective external governance for better firm value creation, especially for non-family businesses in developing countries.

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Research on the External Governance Effects of Short Selling Mechanism on Technological Innovation and Enterprise Performance

Finance and Market ◽

10.18686/fm.v5i1.1613 ◽

2020 ◽

Vol 5 (1) ◽

pp. 18

Author(s):

Wenzhen Mai

Keyword(s):

Corporate Governance ◽

Technological Innovation ◽

Agency Costs ◽

Short Selling ◽

Innovation Performance ◽

Enterprise Performance ◽

Information Asymmetries ◽

External Governance

<p>The effect of short selling mechanism is remained to be discussed as the conjecture regulators regard it as the cause of stock crash, while numerous previous studies have shown the external corporate governance effect of short selling which could supervise and monitor the behaviors of managements by reducing information asymmetries and agency costs. By reviewing the precious researches on the short selling, the findings of this study are that besides short selling could improve the informativeness of stock pricing, it also acts as external corporate governor and innovation motivator to develop the overall value and innovation performance of firms. </p>

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Disciplining Role of Short Sellers: Evidence From M&A Activity

Journal of Management ◽

10.1177/0149206320912307 ◽

2020 ◽

pp. 014920632091230

Author(s):

Wei Shi ◽

Hermann Achidi Ndofor ◽

Robert E. Hoskisson

Keyword(s):

Stock Prices ◽

Negative Influence ◽

Negative Information ◽

Short Selling ◽

Decision Quality ◽

Governance Mechanism ◽

Short Sellers ◽

Top Managers ◽

External Governance

Prior research has focused on the influence of long investors (e.g., institutional investors) on merger-and-acquisition (M&A) decisions. This study investigates the role of short sellers in shaping managerial acquisitiveness and M&A decision quality. Short sellers impose a downward pressure on stock prices by disseminating negative information to the market. Given that managerial wealth and job security hinge on stock prices, top managers respond to increased short selling by refraining from excessive M&A activities because M&As could provide opportunities for short sellers to spread negative information and dampen stock prices. Furthermore, the negative influence of short sellers on managerial acquisitiveness is enhanced by the market for corporate control as an external governance mechanism and by CEO equity ownership as an internal governance mechanism. When firms with increasing short selling do engage in M&As, they gain higher M&A announcement returns and operating performance. We test our hypotheses using firms in the S&P 1500 from 2002 to 2014 and find support for our arguments.

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Short-Selling and Financial Performance of SMEs in China: The Mediating Role of CSR Performance

International Journal of Financial Studies ◽

10.3390/ijfs9020022 ◽

2021 ◽

Vol 9 (2) ◽

pp. 22

Author(s):

Wenzhen Mai ◽

Nik Intan Norhan binti Abdul Hamid

Keyword(s):

Financial Performance ◽

Stock Exchange ◽

Panel Data Analysis ◽

Short Selling ◽

Mediating Effect ◽

Mediating Role ◽

Firm Financial Performance ◽

Corporate Executives ◽

External Governance

The aim of this study is to examine the effect of short-selling deregulation on the financial performance of SMEs in China. The external governance role of short-selling is also tested by adopting corporate social responsibility (CSR) performance as the mediating effect. This study investigates a panel data analysis with a sample of 5038 firm-years of SMEs listed in Shenzhen Stock Exchange from 2010 to 2019. The PSM-DID method is adopted in this study to alleviate self-selection and endogenous problems to observe the comparable pure effect of short-selling deregulation, while the mediation test is conducted based on Baron and Kenny’s model. The finding of this study showed that the existence of short-selling could enhance firm financial performance and the mediating effect of CSR performance position in their relationship. In addition, the further analysis revealed that the mediating effect of CSR is more pronounced for family businesses and firms with high real short-selling threats. The robust test of alternative measurements is conducted and valid. This study provides insights for policymakers to consider further short-selling ban lifting and corporate executives to practice more CSR activities to improve the financial performance. Limitations and further implications of this study are also discussed.

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