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On The Informational Effect Of Short-Sales Constraints: Evidence From The Tokyo Stock Exchange

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  • Naoto Isaka

Abstract

Using a database of stock lending fees for Japanese centralized margin transactions, I show that short-sales constraints reduce the adjustment speed of stock prices to negative information before the announcements of revised earnings forecasts disclosed by firms in the Tokyo Stock Exchange from July 1998 to December 2001. I find that the cumulative abnormal returns (CARs) of the stocks with high short-sales costs are insensitive to negative information on pre-announcement days, but the CARs of these stocks become significantly lower than the CARs of the stocks with low short-sales costs when the announcements reveal negative information to the public. 2007 The Southern Finance Association and the Southwestern Finance Association.

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  • Naoto Isaka, 2007. "On The Informational Effect Of Short-Sales Constraints: Evidence From The Tokyo Stock Exchange," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 30(4), pages 455-471.
  • Handle: RePEc:bla:jfnres:v:30:y:2007:i:4:p:455-471
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    Cited by:

    1. Takahashi, Hidetomo & Xu, Peng, 2016. "Trading activities of short-sellers around index deletions: Evidence from the Nikkei 225," Journal of Financial Markets, Elsevier, vol. 27(C), pages 132-146.
    2. Lee, Bong-Soo & Ko, Kwangsoo, 2014. "Are Japanese short sellers information detectives?," Journal of the Japanese and International Economies, Elsevier, vol. 34(C), pages 89-97.
    3. Akira Yamazaki, 2013. "Production Atomless Economies," Working Papers 25, Meisei University, School of Economics.
    4. Lecce, Steven & Lepone, Andrew & McKenzie, Michael D. & Segara, Reuben, 2012. "The impact of naked short selling on the securities lending and equity market," Journal of Financial Markets, Elsevier, vol. 15(1), pages 81-107.
    5. Sheridan Titman & Naoto Isaka, 2014. "Long-run Effects of Minimum Trading Unit Reductions on Stock Prices," International Review of Finance, International Review of Finance Ltd., vol. 14(1), pages 75-103, March.
    6. Frino, Alex & Lecce, Steven & Lepone, Andrew, 2011. "Short-sales constraints and market quality: Evidence from the 2008 short-sales bans," International Review of Financial Analysis, Elsevier, vol. 20(4), pages 225-236, August.

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