Topic: The Invisible Hand of Short Selling: Does Short Selling Discipline Earnings Manipulation?
Speaker: Bohui Zhang, Senior Lecturer in Finance, The University of New South Wales
Date: March 12th, 2014 (Wed.)
Time: 1:00-2:30pm
Location: Building 4, Room 101
Language: English
Abstract:
We hypothesize that short selling has a disciplining role vis-à-vis managers of a firm that forces them to reduce earnings manipulation. Using firm-level short-selling data across 33 countries over a sample period from 2002 to 2009, we document a significantly negative relationship between the threat of short selling and earnings manipulation. Using an instrumental variable approach and focusing on exogenous events (cross-sectional and time-series regulatory and market restrictions), we offer evidence of a causal link between the two. Our findings suggest that short selling functions as an external governance mechanism to discipline managers.
About the speaker:
Dr. Bohui Zhang is a senior lecturer in Finance at The University of New South Wales. Dr. Zhang received his Ph.D. from Nanyang Technological University in 2008 and his M.Sc. from Hong Kong University of Science and Technology in 2004. Dr. Zhang’s current research interests focus on international capital markets, including empirical asset pricing, institutional investors, market microstructure, financial accounting and corporate governance. His research has been published in leading academic journals, such as Journal of Financial Economics, Journal of Banking and Finance and Management Science.
Dr. Zhang’s article “The Invisible Hand of Short Selling: Does Short Selling Discipline Earnings Manipulation?” won the 2013 CFA Society Toronto Award, the 2013 TCW Best Paper Award and the 2013 SIRCA Best Paper Award. Dr. Zhang’s research has been presented at numerous academic conferences such as Annual Meeting the Financial Management Association, Northern Finance Association Conference and China International Conference in Finance.
