Work

Short selling and product market competition

Year: 2024

Type: article

Abstract: We empirically investigate how short selling affects product market performance. We find that higher short sales of stocks lead to declines in firms' market shares. The effects are stronger in larger firms, concentrated industries, and industries where firms compete in strategic substitutes. Further results suggest that firms' competitive interactions amplify the effects of short selling on market shares via a greater sensitivity of output levels to the release of information contained in stock prices. Our findings are consistent with a managerial disciplining channel in which short interest reveals information of inefficient overreach by firms with market power, leading to downsizing and spin-offs.

Source: Journal of Banking & Finance

DOI: 10.1016/j.jbankfin.2024.107335

Authors: Rafael Matta, Sergio H. Rocha, Paulo Vaz

Institutions: SKEMA Business School, Université Côte d'Azur, Monash University, Universidade Federal de Pernambuco

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,240

OpenAlex ID: W4404794471

FWCI: 0.715

Cites: 81

Cited by: 2

Related to: 10