Work

Can short selling improve internal control? An empirical study based on the difference‐in‐differences model

Year: 2019

Type: article

Abstract: Based on pilot margin trading in China, this study examines how short selling affects internal control quality in listed firms. Using the difference‐in‐differences approach, we find that compared with control firms, firms that are eligible for short selling significantly improve their internal control after they are designated as underlying securities. We consider the effects of state ownership and external auditors. The improvement in internal control is only significant for non‐state‐owned firms and firms audited by non‐Big 4 auditors. These findings indicate that short selling can improve firms’ internal control and play a role in their corporate governance.

Source: Accounting and Finance

DOI: 10.1111/acfi.12456

Authors: Huili Chen, Ying Chen, Bin Lin, Yanchao Wang

Institutions: Guangdong University of Finance, Sun Yat-sen University, Central University of Finance and Economics

Language: English

Topic: Auditing, Earnings Management, Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: hybrid

Estimated APC paid: $3,000