| As the implementation of the short selling mechanism, investors can make a profit by short selling when the stock price is expected to drop in the future, thus promoting the concerns and demands of investors on the underlying negative private information. The short selling behavior is a "catalyst" for the strong reaction of stock price to the negative information, and it plays a role in the stock price decline. The management earnings forecast is an important reference for investors to make investment decisions. The reduction of its precision, at the same time, will increase investors’ cost of information analysis, thus reduce the enthusiasm of short selling. In response to the short selling pressure, would managers reduce the readability of bad forecast news? Whether different external market environment and internal ownership balance have an impact on above relationship?Through a natural experiment(Short Selling Mechanism) and Difference- in-Differences model, this paper finds that short selling has a causal effect on the precision of manager’s earnings forecast. That is, in response to increased short selling pressure, managers reduce the readability(or increase the fuzziness) of bad news. In particular, in the areas of lower degree of marketization, short selling mechanism reduces the precision of bad news management earnings forecast significantly. While in the areas of higher degree of marketization, the effect of short selling mechanism on forecast precision is not significant. Further investigation of corporate ownership structure, this paper finds that, as the lack of equity balance, short selling mechanism reduces the precision of bad news management earnings forecast significantly. This paper provides new empirical evidence on the economic consequences of the short selling mechanism. It also pro vides a theoretical reference for improving the short selling mechanism and further deepening the reform of the financial system. |
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