Working Paper: NBER ID: w10659
Authors: Owen A. Lamont
Abstract: I study battles between short sellers and firms. Firms use a variety of methods to impede short selling, including legal threats, investigations, lawsuits, and various technical actions intended to create a short squeeze. These actions create short sale constraints. Consistent with the hypothesis that short sale constraints allow stocks to be overpriced, firms taking anti-shorting actions have in the subsequent year very low abnormal returns of about -2 percent per month.
Keywords: short selling; antishorting actions; stock pricing; overpricing; market efficiency
JEL Codes: G14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| firms' antishorting actions (G34) | low abnormal returns (G17) |
| low abnormal returns (G17) | severe declines and bankruptcy (G33) |