IDEAS home Printed from https://ideas.repec.org/a/bla/jbfnac/v45y2018i3-4p352-394.html
   My bibliography  Save this article

Accounting conservatism and short selling: Evidence from China

Author

Listed:
  • Zhi Jin
  • Bingxuan Lin
  • Xue Yang
  • Ting Zhang

Abstract

Using China's short†selling pilot program as a quasi†experiment, we find that the prospect of short selling has significantly increased conditional accounting conservatism among firms that are eligible for short selling, consistent with a short sellers’ disciplining effect hypothesis. When short selling takes position ex post, accounting conservatism starts to decrease with an increased downward pressure on stock prices. Moreover, the short†selling effect of increased conditional accounting conservatism becomes stronger for state†owned enterprises, and this effect is accompanied by an increase of unconditional conservatism. As corroborating evidence to support the disciplining hypothesis, we show that accounting conservatism is significantly decreased for firms that are removed from the short†selling eligibility list. Our results are robust after considering the endogeneity issue in measuring downward stock price pressure, and after constructing the control firms by using both a propensity score matching method and an alternative measure for accounting conservatism. Overall, we provide important evidence on the feedback effects that the capital market has on firm financial reporting.

Suggested Citation

  • Zhi Jin & Bingxuan Lin & Xue Yang & Ting Zhang, 2018. "Accounting conservatism and short selling: Evidence from China," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 45(3-4), pages 352-394, March.
    • Handle: RePEc:bla:jbfnac:v:45:y:2018:i:3-4:p:352-394
    DOI: 10.1111/jbfa.12302
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/jbfa.12302
    Download Restriction: no
    File URL: https://libkey.io/10.1111/jbfa.12302?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jie He & Kam C. Chan, 2023. "Does short sales deregulation affect qualitative information disclosure?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(S1), pages 1351-1380, April.
    2. Lei Chen & Zhi Jin & Xue Yang, 2023. "Short selling and the independence of business‐related analysts: Evidence from an emerging market," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(3), pages 3297-3323, September.
    3. Hui Ding & Xiaoran Ni & Hongmei Xu, 2021. "Short selling and labor investment efficiency: evidence from the Chinese stock market," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(S1), pages 2451-2476, April.
    4. Zhou, Jingting & Li, Wanli & Yan, Ziqiao & Lyu, Huaili, 2021. "Controlling shareholder share pledging and stock price crash risk: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 77(C).
    5. Xiaoxu Ling & Siyuan Yan & Louis T. W. Cheng, 2022. "Investor relations under short‐selling pressure: Evidence from strategic signaling by company site visits," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 49(7-8), pages 1145-1174, July.
    6. Jiang, Haiyan & Jia, Jing, 2021. "Short selling and future cash flow predictability of capital investment: Evidence from Australia," Journal of Contemporary Accounting and Economics, Elsevier, vol. 17(1).
    7. Haiyan Jiang & Gary Tian & Donghua Zhou, 2021. "The influence of the deregulation of short‐selling on related‐party transactions: Evidence from China," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(5-6), pages 1022-1056, May.
    8. Rui Wang, 2021. "The attention of long‐term institutional investors and timely loss recognition," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(9-10), pages 1596-1629, October.
    9. Sha, Yezhou & Shah, Syed Ghulam Meran & Sarfraz, Muddassar, 2023. "Short selling and SME irregular CEO succession: Witnessing the moderating role of earnings management," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 163-173.
    10. Ning Hu & Siqi Lu & Tao Ma & Jianfang Ye, 2020. "Short‐selling and cost of equity: evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(4), pages 3681-3707, December.
    11. Jianghua Shen & Lingmin Xie & Zhimin Xie, 2022. "The unintended consequence of financial statement comparability: evidence from managerial learning practices," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(3), pages 3073-3106, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jbfnac:v:45:y:2018:i:3-4:p:352-394. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0306-686X .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.