Date/Time
Date(s) - Wed 17 February
12:30 - 13:30
Location
RH 104, Rutherford House, VUW
Abstract: This paper investigates the disciplinary effect of short selling on firm behavior. Using Regulation SHO’s pilot program as a natural experiment of removing short-selling constraints, we study how such a change affects a firm’s mergers and acquisition (M&A) activities. We find that during the pilot program, firms in the pilot group for which the short sales constraints are removed, significantly reduce their engagements in value-destroying M&As. The disciplinary effect happens for firms with a higher level of agency problem and with a higher CEO incentive pay. The disciplinary effect works through a channel in that the short sellers of firms in the pilot group significantly increase their activities around the value-destroying M&A announcements to impose the pressure. Finally, we show the overall M&A deal quality for firms in the pilot group improves during the pilot program due to their significantly fewer engagements in value-destroying M&As.
About the presenters
Hai Lin is a Professor in Finance and the Head of the School of Economics and Finance, Victoria University of Wellington. He received his Ph.D. from Xiamen University in China. Before moving to VUW, he had worked at Xiamen University and the University of Otago. He also visited Cornell University, Singapore Management of University, and State University of New York at Buffalo.
Chang is a PhD student at Victoria University of Wellington. His supervisor is Hai Lin. Chang’s thesis is on corporate finance.
Also available to attend via Zoom. The Zoom link is https://vuw.zoom.us/j/99612174755.