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Keeping short sellers at bay: The deterring role of corporate lobbying

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  • Guldiken, Orhun
  • Xu, Le
  • Sim, Dasol
  • Abdurakhmonov, Mirzokhidjon

Abstract

This study responds to recent calls in the strategic management literature to examine firm strategies that influence the decision of short sellers to target firms. Using precepts from signaling theory, the current study theorizes that a firm’s lobbying activity – a critical form of corporate political activity (CPA) – acts as a signal that deters short sellers from targeting that firm. This study also examines the contingent roles of two factors – lobbying scope and regulatory risk – that influence the extent to which lobbying deters short interest. By testing these arguments in a longitudinal sample of S&P 1500 firms from 2008 to 2018, combined with post-hoc interviews with short sellers, the proposed theoretical framework receives strong empirical support. This study extends current CPA literature by investigating a proximal and indirect benefit of lobbying and research on capital market investors by emphasizing the role of short sellers.

Suggested Citation

  • Guldiken, Orhun & Xu, Le & Sim, Dasol & Abdurakhmonov, Mirzokhidjon, 2024. "Keeping short sellers at bay: The deterring role of corporate lobbying," Journal of Business Research, Elsevier, vol. 184(C).
    • Handle: RePEc:eee:jbrese:v:184:y:2024:i:c:s0148296324003886
    DOI: 10.1016/j.jbusres.2024.114884
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