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Daily short selling around reverse stock splits

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  • Blau, Benjamin M.
  • Cox, Justin S.
  • Griffith, Todd G.
  • Voges, Ryan

Abstract

We examine prices and daily short selling activity around reverse stock splits using a difference-in-difference identification strategy. The results show negative returns for treatment stocks, relative to control stocks, around reverse splits. Additionally, short selling increases for treatment stocks vis-à-vis control stocks in the days after the reverse split announcements, but not before. Moreover, short selling on reverse split announcement and effective dates does not appear to contain more information about future negative returns than usual. Together, the results indicate that reverse stock splits attract short sellers’ attention, but that they are no more informed around these events than normal.

Suggested Citation

  • Blau, Benjamin M. & Cox, Justin S. & Griffith, Todd G. & Voges, Ryan, 2023. "Daily short selling around reverse stock splits," Journal of Financial Markets, Elsevier, vol. 65(C).
    • Handle: RePEc:eee:finmar:v:65:y:2023:i:c:s1386418123000307
    DOI: 10.1016/j.finmar.2023.100832
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    More about this item

    Keywords

    Short selling; Reverse stock splits; Market efficiency;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General

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