Abstract
We study the causal effect of short selling on managers’ tone during earnings conference calls. Utilising Regulation SHO, a pilot scheme governing short-selling activity, we find that pilot firms with relaxed short-selling constraints use more negative tone. This effect is more pronounced for firms that are easier to short sell, those where managers have an incentive to manipulate tone, and those that engage in less earnings management. Moreover, the negative relationship between tone and future earnings no longer holds for the pilot firms after Reg SHO, suggesting that the tone of conference calls by pilot firms better reflects their future earnings after the regulation. Overall, our findings suggest that short sellers play a corporate governance role in tone management.
| Original language | English |
|---|---|
| Pages (from-to) | 730-755 |
| Number of pages | 26 |
| Journal | Accounting and Business Research |
| Volume | 54 |
| Issue number | 6 |
| Early online date | 8 Aug 2023 |
| DOIs | |
| Publication status | Published - 2024 |
| Externally published | Yes |
Bibliographical note
We would like to thank participants and discussants at Peking University, FMA Europe 2019, AsianFA 2019, and China Finance Review International Conference 2019. We would like to thank Jon Fulkerson, Laura Liu, Bing Han, Hai Lu, Timothy Loughran, and William Megginson for their comments.Keywords
- Regulation SHO
- Short-Selling
- Tone Management
- Earnings Conference Calls
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