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Title: Short selling threat and real activity manipulation : evidence from a natural experiment
Authors: Chen, HA
Wu, Q 
Issue Date: Mar-2021
Source: Advances in accounting, Mar. 2021, v. 52, 100514, p. 1-15,
Abstract: In this paper, we investigate whether and how short selling threat affects real activity manipulation. Using a regulatory experiment (Regulation SHO) that removes short selling restrictions on randomly selected pilot firms, we find that real activity manipulation is significantly reduced for pilot firms in response to increased short selling threat during the experiment period. The reduction effect is stronger for pilot firms with a transparent financial reporting strategy, a high level of negative financial reporting sentiment, and bad news. Our finding confirms short sellers' monitoring effect on opportunistic behavior, even for real activity manipulation that is difficult to detect.
Keywords: Real earnings management
Regulation sho
Short selling threat
Publisher: Elsevier
Journal: Advances in accounting 
ISSN: 0882-6110
DOI: 10.1016/j.adiac.2021.100514
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