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Short selling and future cash flow predictability of capital investment: Evidence from Australia

journal contribution
posted on 2023-05-20, 18:53 authored by Jiang, H, Jing JiaJing Jia
This study investigates whether short selling, as a market mechanism, has a disciplining function for firms’ investment efficiency, measured through the association between capital investment and future cash flows. Using a sample of large Australian listed firms, we find that short-selling activities improve the positive relationship between capital investment and future cash flow and that this effect is mainly driven by firms with a risk management committee (RMC). Additional analyses show that the disciplining function of short selling for firms’ investment efficiency varies with (i) the level of firms’ financial constraints, (ii) firms’ life cycle or (iii) CEO share incentives. The main results are robust to a batch of endogeneity tests to address the potential self-selection bias and the concern about reverse causality.

History

Publication title

Journal of Contemporary Accounting and Economics

Volume

17

Pagination

1-17

ISSN

1815-5669

Department/School

TSBE

Publisher

Elsevier Ltd

Place of publication

United Kingdom

Rights statement

Copyright 2020 Elsevier Ltd. All rights reserved

Repository Status

  • Restricted

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