Short sales manipulation and product market relationships

Resumo/Abstract:This paper examines a potential dark side of short selling, namely its impact on the disruption of product market relationships. High shorting activity in the stock of a supplier is associated with higher likelihood that a customer terminates an existing relationship and that the supplier loses customer market share. Blocks held by (long-term) institutional investors in the supplier help mitigate this effect. Instrumental variable and quasi-natural experiment approaches provide a causal interpretation to our findings. Our results are consistent with a model in which manipulative uninformed short sellers can disrupt a firm’s relationships with business counterparties, but informed block ownership serves as an effective mechanism to counteract this disruption.

Outros seminários / Other seminars: Programa completo / Full programme.