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The Real Effects of Short-Selling Constraints
2015
The Review of financial studies
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We use a regulatory experiment (Regulation SHO) that relaxes short-selling constraints on a random sample of US 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
doi:10.1093/rfs/hhv013
fatcat:wfyh66vsenc2th3yylqcccl45y