Abstract
This study investigates the relation between board independence and short selling. The findings suggest that board independence reduces short selling. This is consistent with the evidence in the current literature that board independence reduces information asymmetry and should limit informed trading based on private information. Further analyses suggest that the beneficial effect of board independence on limiting short selling is affected by the regularity of independent directors’ board meeting attendance, stock ownership by independent directors, and stock ownership by Chief Executive Officers. The robustness tests with the Sarbanes-Oxley Act of 2002 and propensity score-matched sample further corroborate the above findings.
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