Abstract
This study empirically analyzes how short selling affects investment efficiency. There is a mixed view that short selling has a positive function and a negative function in the capital market. In this study, it was predicted and analyzed that if short selling had a positive function, it would increase investment efficiency, and if it had a negative function, it would decrease investment efficiency. We find that the more active the short-selling, the more inefficient the investment. When divided into overinvestment sample and underinvestment sample, negative relationship was maintained only in overinvestment sample. In other words, it can be inferred that the investment inefficiency is due to the over-investment sample. Second, as a result of analyzing the samples according to the ratio of outside directors, a negative relationship was found only in the group with a small ratio of outside directors. Third, as a result of analyzing the samples according to the size of the board, a negative relationship was found only in the group with a large board size. Overall, this study is meaningful in that it revealed the implications of short selling on investment efficiency.
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