Short-selling pressure and year-over-year MD&A modifications

Using the SEC's Regulation SHO as a natural experiment, we examine the effect of an increase in short selling pressure on the year-over-year modification of Management Discussion and Analysis (MD&A) section of firms' 10-K reports. We find that the elevated threat of short selling, resulting from the removal of short-sale constraint, causes the randomly selected pilot firms to modify the MD&A section less relative to the previous year than non-pilot firms during the Regulation SHO period (2005-2007). Moreover, cross-sectional analyses indicate that this effect is pronounced in firms with moderately good news; firms that increase investment or equity issuance; larger or overvalued firms; and firms with conservative managers, financial stability, and opaque information environments.

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Work Title Short-selling pressure and year-over-year MD&A modifications
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Open Access
Creators
  1. Johan Maharjan
  2. Seung Won Lee
Keyword
  1. Corporate disclosure
  2. Management’s Discussion and Analysis (MD&A)
  3. Short-selling threats
  4. Price efficiency
  5. Exogenous shock
License In Copyright (Rights Reserved)
Work Type Article
Publisher
  1. Accounting & Finance
Publication Date December 18, 2021
Publisher Identifier (DOI)
  1. https://doi.org/10.1111/acfi.12895
Deposited August 02, 2022

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  • Added Creator Johan Maharjan
  • Added Creator Seung Won Lee
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    Keyword
    • Corporate disclosure, Management’s Discussion and Analysis (MD&A), Short-selling threats, Price efficiency, Exogenous shock
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