Abstract
ABSTRACT Using a balanced panel of treatment and control firms based on Regulation SHO of 2004 which suspended short sale price tests for a third of the stocks in the Russell 3000 index, we examine the impact of short selling on managerial ability. We found evidence that short selling enhances managerial ability in treatment firms during the period in which short sale price tests were suspended. Subsample analysis suggests that our results could be interpreted within the context of risk-taking behavior of CEOs.
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