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Do short sellers anticipate late filings?

Author

Listed:
  • Dai, Rui
  • Li, Ting
  • Zaiats, Nataliya
  • Zhao, Xinlei

Abstract

Exploiting the setting of firms that are unable to disclose timely financial reports and thus must file with the U.S. Securities and Exchange Commission (SEC) the NT 10-K (Q) report, this study examines whether short sellers target firms with financial reporting weaknesses. We find that short interest increases in firms prior to the NT 10-K (Q) filing, suggesting that short sellers identify and target firms that cannot file their financial reports in a timely manner. Short selling is positively significantly related to subsequent late filing status, and is more pronounced in late filers with high newswire activity and with accelerated filing deadlines. Short selling of late filing firms is significantly negatively related to subsequent performance thereby suggesting that short sellers' trades pertinent to late filers are profitable. Overall, the results underscore a high information processing ability of short sellers in the setting of firms that exhibit financial reporting deficiencies.

Suggested Citation

  • Dai, Rui & Li, Ting & Zaiats, Nataliya & Zhao, Xinlei, 2021. "Do short sellers anticipate late filings?," Journal of Corporate Finance, Elsevier, vol. 69(C).
    • Handle: RePEc:eee:corfin:v:69:y:2021:i:c:s092911992100167x
    DOI: 10.1016/j.jcorpfin.2021.102045
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    Cited by:

    1. Dai, Rui & Ng, Lilian & Zaiats, Nataliya, 2022. "Short seller attention," Journal of Corporate Finance, Elsevier, vol. 72(C).

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    More about this item

    Keywords

    Late SEC filings; Short selling; Accounting irregularity; Financial reports; Stock performance;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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