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Short Selling and Total-Factor Productivity: Evidence from a Quasi-Natural Experiment in China

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  • Xuewen Kuang
  • Jing Jiang
  • Chenyu Luo
  • He Lin

Abstract

This study examines the effect of short selling on total-factor productivity (TFP) using China’s short-selling pilot program as a quasi-natural experiment. Short-selling significantly improves TFP, and this positive effect is mainly driven by improvements in firms’ innovation ability and resource-allocation efficiency. The results are robust to potential endogeneity using propensity-score matching, a placebo test, and exogenous shocks. Further, the positive effect is more pronounced when external governance mechanisms (i.e. market competition and institutional investor supervision) are weak.

Suggested Citation

  • Xuewen Kuang & Jing Jiang & Chenyu Luo & He Lin, 2024. "Short Selling and Total-Factor Productivity: Evidence from a Quasi-Natural Experiment in China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 60(10), pages 2111-2125, August.
    • Handle: RePEc:mes:emfitr:v:60:y:2024:i:10:p:2111-2125
    DOI: 10.1080/1540496X.2023.2284309
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