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Does short selling of customers affect analysts' forecasts for suppliers?

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  • Chang, Maosong
  • Jiang, Bin
  • Ma, Chen
  • Wang, Qianyu

Abstract

This study examines the impact of customers being short selling targets on analysts' earnings forecasts for suppliers. We find that customers' short selling significantly enhances the accuracy of analysts’ earnings forecasts for suppliers while reducing forecast dispersion and optimism. We identify two primary mechanisms: improved information disclosure quality of customers under short selling pressure, and spillover effects within the supply chain. Further analysis reveals that the impact of customer short selling is more pronounced when customer-supplier relationships are closer, both parties are in the same industry, suppliers operate in cyclical industries, analysts possess greater professional experience or are star analysts, suppliers are state-owned enterprises, and both parties have a common analyst. These findings underscore the role of short selling in mitigating information asymmetry across supply chain and offer policy implications for information users like financial analysts. Our findings also have implications for regulators and other financial intermediaries.

Suggested Citation

  • Chang, Maosong & Jiang, Bin & Ma, Chen & Wang, Qianyu, 2026. "Does short selling of customers affect analysts' forecasts for suppliers?," Economic Modelling, Elsevier, vol. 160(C).
    • Handle: RePEc:eee:ecmode:v:160:y:2026:i:c:s0264999326001124
    DOI: 10.1016/j.econmod.2026.107583
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