Short sellers contribute to price discovery and market efficiency. However, the source of their information advantage is not well understood. We analyze 820 public short reports from 2010 to 2021 and identify 18 categories of information sources. The average short seller report references 36 pre-existing information sources and 1.5 new information sources (previously unknown to investors). We examine the factors influencing the voluntary disclosure of these sources, including information quality, the information environment of target firms, legal risk, and short seller reputation concerns. Regarding information quality, we find that pre-existing information is associated with more rapid price adjustments, while new information is associated with slower but larger price adjustments. Short sellers tend to disclose more pre-existing information when legal risk is high; they disclose more new information sources when attacking firms with richer information environments. Finally, high reputation short sellers tend to disclose fewer sources overall.
| Speaker: | Dr Mark Bradshaw Joseph F Cotter Professor and Chair of Accounting Department, Boston College |
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