Research On The Relationship Of Short Sales Mechanism And Quality Of Accounting Information

Recently, besides the formal legal system, short sales mechanism is playing an increasingly important role for the development of capital market. Jim Chanos shorting Enron in 2010, which made the stock price of this company fell from $ 90 to $ 1.With the development of the short situation, the Enron’s fraud surfaced. In recent years, U.S.-listed Chinese companies had once been shorted by muddy water, citron and other short sellers. According to the incomplete statistics, from December 2010 to 2013, there are 40 Chinese companies listed in the United States be out of the market because of their non-compliant behavior. Therefore, short sellers and the short selling in the capital market played the role of "scavenger" of false information objectively.In the paper, short Chinese companies listed in United States shorted by short sellers from 2007 to 2013 in U.S were regarded as the study sample. in control of performance of the company, growth, financial leverage, company size, ownership concentration, ownership balance degree, the proportion of independent directors and so on, to verify the correlation of the short sales mechanism and the quality of accounting information. The results show that, the more of the report of shorting, the company was released, the higher the quality of the company’s earnings, and the higher the quality of accounting information. In addition, the sustainability and authenticity of earnings can improve by short sales mechanism, the stability and security of the cash can reduce. Finally, based on the results of empirical research, this paper present the suggestion, to fill the gaps of stock market trading system, short sales mechanism should be permitted fully in china’s capital, which can monitor effectively the quality of accounting information.