Abstract
While it is well known that short selling predicts future negative stock price performance, it has not been established whether short selling predicts future negative operating performance. We find that firms in the top decile of increases in short interest (an increase of about four percentage points) experience a 21% subsequent decline in operating performance relative to matched control firms. The greater the increase in short interest, the larger the decline in operating performance. The results are robust to alternative performance measures and to sample splits based on firm size. These results suggest that short interest may reflect private information about firm fundamentals rather than other factors that may drive stock price changes.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
