IDEAS home Printed from https://ideas.repec.org/a/plo/pone00/0284947.html

Does Chinese-style margin trading promote the high-quality development of listed companies?

Author

Listed:
  • Jingyao Tang
  • Yu Wu
  • Yunqi Ye

Abstract

Using the margin trading reform of China’s stock market as a quasinatural experiment, this paper explores whether margin trading promotes the high-quality development of listed companies. The results show that total factor productivity (TFP) significantly decreases after listed companies are included in the underlying stocks of margin trading. In addition, the negative impacts are stronger for listed companies with higher financial leverage, lower cash asset holdings, lower shareholdings of financial institution investors, and less attention from securities analysts. Further research shows that the negative impacts of margin trading on TFP are closely related to the deterioration of the information environment and the tightening of financing constraints. When listed companies are included in the underlying stocks of margin trading, they use a lower proportion of their net profit for internal financing (and a higher proportion of their net profit for cash dividends) and significantly reduce external equity financing. The results of this study show that the margin trading reform in China’s stock market may inhibit the high-quality development of listed companies to a certain extent.

Suggested Citation

  • Jingyao Tang & Yu Wu & Yunqi Ye, 2023. "Does Chinese-style margin trading promote the high-quality development of listed companies?," PLOS ONE, Public Library of Science, vol. 18(4), pages 1-22, April.
    • Handle: RePEc:plo:pone00:0284947
    DOI: 10.1371/journal.pone.0284947
    as

    Download full text from publisher

    File URL: https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0284947
    Download Restriction: no
    File URL: https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0284947&type=printable
    Download Restriction: no
    File URL: https://libkey.io/10.1371/journal.pone.0284947?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Feng, Xunan & Chan, Kam C., 2016. "Information advantage, short sales, and stock returns: Evidence from short selling reform in China," Economic Modelling, Elsevier, vol. 59(C), pages 131-142.
    2. Bronwyn Hall, 2004. "The financing of research and development," Chapters, in: Anthony Bartzokas & Sunil Mani (ed.), Financial Systems, Corporate Investment in Innovation, and Venture Capital, chapter 2, Edward Elgar Publishing.
    3. Ekkehart Boehmer & Juan (Julie) Wu, 2013. "Short Selling and the Price Discovery Process," The Review of Financial Studies, Society for Financial Studies, vol. 26(2), pages 287-322.
    4. Vivian W. Fang & Allen H. Huang & Jonathan M. Karpoff, 2016. "Short Selling and Earnings Management: A Controlled Experiment," Journal of Finance, American Finance Association, vol. 71(3), pages 1251-1294, June.
    5. Gustavo Grullon & Sébastien Michenaud & James P. Weston, 2015. "The Real Effects of Short-Selling Constraints," The Review of Financial Studies, Society for Financial Studies, vol. 28(6), pages 1737-1767.
    6. Zhao, Zhongkuang & Li, Shuqi & Xiong, Heping, 2014. "Short sale constraints, disperse pessimistic beliefs and market efficiency — Evidence from the Chinese stock market," Economic Modelling, Elsevier, vol. 42(C), pages 333-342.
    7. Asquith, Paul & Mullins, David W, Jr, 1983. "The Impact of Initiating Dividend Payments on Shareholders' Wealth," The Journal of Business, University of Chicago Press, vol. 56(1), pages 77-96, January.
    8. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(2), pages 317-341.
    9. Ekkehart Boehmer & Charles M. Jones & Xiaoyan Zhang, 2008. "Which Shorts Are Informed?," Journal of Finance, American Finance Association, vol. 63(2), pages 491-527, April.
    10. Wooldridge, Jeffrey M., 2009. "On estimating firm-level production functions using proxy variables to control for unobservables," Economics Letters, Elsevier, vol. 104(3), pages 112-114, September.
    11. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    12. Massimo Massa & Bohui Zhang & Hong Zhang, 2015. "The Invisible Hand of Short Selling: Does Short Selling Discipline Earnings Management?," The Review of Financial Studies, Society for Financial Studies, vol. 28(6), pages 1701-1736.
    13. Steven N. Kaplan & Luigi Zingales, 1997. "Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(1), pages 169-215.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hu, Ting & Chi, Yanzhe, 2019. "Can short selling activity predict the future returns of non-shortable peer firms?," Pacific-Basin Finance Journal, Elsevier, vol. 53(C), pages 165-185.
    2. Connelly, Brian L. & Shi, Wei & Cheng, Xin & Yin, Cheng, 2021. "Short Sellers: A screening theory perspective on B2B relationships," Journal of Business Research, Elsevier, vol. 134(C), pages 393-404.
    3. Chang Yu, 2024. "Short selling and firm investment efficiency," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 38(2), pages 191-237, June.
    4. Jiang, Haiyan & Jia, Jing, 2021. "Short selling and future cash flow predictability of capital investment: Evidence from Australia," Journal of Contemporary Accounting and Economics, Elsevier, vol. 17(1).
    5. Li, Keming & Nishikawa, Takeshi & Rao, Ramesh P., 2025. "Does the threat of short selling discipline management? Evidence from default risk changes around regulation SHO," Journal of Financial Markets, Elsevier, vol. 73(C).
    6. Zhou, Yankun & Tang, Taijie & Luo, Le, 2023. "Is corporate environmental investment a strategic risk management tool? Evidence from short selling threats," Pacific-Basin Finance Journal, Elsevier, vol. 82(C).
    7. Bessler, Wolfgang & Vendrasco, Marco, 2022. "Short-selling restrictions and financial stability in Europe: Evidence from the Covid-19 crisis," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 80(C).
    8. Brockman, Paul & Luo, Juan & Xu, Limin, 2020. "The impact of short-selling pressure on corporate employee relations," Journal of Corporate Finance, Elsevier, vol. 64(C).
    9. Wang, Shujing & Yan, Hongjun & Zhong, Ninghua & Tang, Yizhou, 2024. "Indirect effects of trading restrictions," Journal of Corporate Finance, Elsevier, vol. 86(C).
    10. Mazouz, Khelifa & Wu, Yuliang, 2022. "Why do firm fundamentals predict returns? Evidence from short selling activity," International Review of Financial Analysis, Elsevier, vol. 79(C).
    11. Stephie Tsai, Hsin-Ju & Wu, Yuliang & Xu, Bin, 2021. "Does capital market drive corporate investment efficiency? Evidence from equity lending supply," Journal of Corporate Finance, Elsevier, vol. 69(C).
    12. Bianca Maria Chirita & Juan A. Máñez Castillejo & Óscar Vicente-Chirivella, 2025. "Perform, start, continue R&D activities: do financial constraints matter?," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 15(1), pages 131-173, March.
    13. Yuan, Li & Rao, Siqi & Yang, Shenggang & Dai, Pengyi, 2023. "Does equity market openness increase productivity? the dual effects of Shanghai-Hong Kong stock Connect program in China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 88(C).
    14. Juwon Jang & Eunju Lee, 2024. "CEO confidence matters: the real effects of short sale constraints revisited," Review of Quantitative Finance and Accounting, Springer, vol. 62(2), pages 603-636, February.
    15. repec:mth:ijafr8:v:9:y:2019:i:1:p:135-151 is not listed on IDEAS
    16. Nilabhra Bhattacharya & Theodore E. Christensen & Qunfeng Liao & Bo Ouyang, 2022. "Can short sellers constrain aggressive non-GAAP reporting?," Review of Accounting Studies, Springer, vol. 27(2), pages 391-440, June.
    17. Deng, Xiaohu & Jiang, Christine & Young, Danqing, 2017. "Short Selling and Politically Motivated Negative Information Hoarding," Working Papers 2017-14, University of Tasmania, Tasmanian School of Business and Economics.
    18. Meng, Qingbin & Huang, Haozheng & Li, Xinyu & Wang, Song, 2023. "Short-selling and corporate default risk: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 87(C), pages 398-417.
    19. Dong, Yunhe & Luo, Haoyi & Xu, Zijin & Yang, Xing, 2024. "Investing while lending: Do index funds improve managerial information disclosure?," International Review of Financial Analysis, Elsevier, vol. 94(C).
    20. Jiang, Haiyan & Chen, Jun, 2019. "Short selling and financial reporting quality: Evidence from Chinese AH shares," Journal of Contemporary Accounting and Economics, Elsevier, vol. 15(1), pages 118-130.
    21. Chang, Eric C. & Lin, Tse-Chun & Ma, Xiaorong, 2019. "Does short-selling threat discipline managers in mergers and acquisitions decisions?," Journal of Accounting and Economics, Elsevier, vol. 68(1).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:plo:pone00:0284947. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: plosone (email available below). General contact details of provider: https://journals.plos.org/plosone/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.