Why Muddy the Water? Short selling and the disclosure of proprietary information |
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| Institution: | 1. School of Management, Shandong University, Jinan, 250100, China;2. School of Business, Macquarie University, Balaclava Road, NSW, 2109, Australia;3. School of Management, Xiamen University, Xiamen, 361005, China;1. Research Institute for Economics and Business Administration, Kobe University, Japan;2. Faculty of Business Administration, Momoyama Gukuin University, Japan;3. Graduate School of Business Administration, Kobe University, Japan;1. School of Accountancy, Queensland University of Technology (QUT), Brisbane, Australia;2. University of Southern Queensland, Toowoomba, Australia;1. The National University of Singapore, Singapore;2. The University of Queensland, Australia;1. School of Accounting, Economics and Finance, Curtin Business School, 6102, Perth, WA, Australia;2. Deakin Business School, Deakin University, Geelong, Victoria, 3220, Australia;3. Fordham University, Bank of Finland, University of Sydney, 45 Columbus Ave, New York, NY 10023, USA;4. The University of Sydney Business School, University of Sydney, Sydney, NSW, 2006, Australia |
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| Abstract: | The conventional wisdom of voluntary disclosure literature is that the major factor preventing firms from disclosing customer-related information is firms' concern for proprietary costs. However, non-disclosure may also happen when firms have bad news to hide and are concerned about short sellers using customer information to verify bad news about the firms. By implementing a difference-in-differences research design against the backdrop of the deregulation of short selling in China, we find that increased short-selling pressure discourages firms from disclosing the identities of major customers. The findings also reveal consistent evidence supporting the bad news hoarding hypothesis rather than the proprietary cost hypothesis. Overall, our study provides an alternative explanation for firms’ lack of disclosure of customer information. |
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| Keywords: | Short selling Disclosure of customer information Quasi-experiment M41 E44 |
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