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Does Short Selling Affect Corporate Payout Policy Evidence from China

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  • Danyun Tang
  • Yukun Pan
  • Dawei Liang
  • Rui Zhao

Abstract

Using China’s short-selling pilot program as an exogenous shock, we provide evidence that removal of short selling constraint has significantly increased firms’ dividend payout. This positive effect is more pronounced for firms with weak monitoring and firms with more information opacity, suggesting that short selling plays an important governance role in investor protection and information disclosure. This association is robust to a series of robustness checks. Furthermore, we find that firms with active short selling activities are more likely to increase the dividend payout, small firms or big firms both show significant increase in dividends after introduced into pilot list, but the effect is weaker for those engaged in repurchase shares. Overall, this study sheds light on the role of short-selling on firms’ payout policy in the emerging market.

Suggested Citation

  • Danyun Tang & Yukun Pan & Dawei Liang & Rui Zhao, 2022. "Does Short Selling Affect Corporate Payout Policy Evidence from China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(14), pages 4065-4078, November.
    • Handle: RePEc:mes:emfitr:v:58:y:2022:i:14:p:4065-4078
    DOI: 10.1080/1540496X.2022.2083498
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    Cited by:

    1. Liu, Jia & Fu, Pengju & Lin, Chunyan, 2023. "Rule improvements and irrational characteristics of herd behaviour–The effects of SMT policy," Finance Research Letters, Elsevier, vol. 56(C).

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