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Short‐selling constraints and corporate payout policy
Ist Teil von
Accounting and finance (Parkville), 2019-12, Vol.59 (4), p.2273-2305
Ort / Verlag
Clayton: Blackwell Publishing Ltd
Erscheinungsjahr
2019
Link zum Volltext
Quelle
EBSCOhost Business Source Ultimate
Beschreibungen/Notizen
This study shows that managers adjust corporate payout policies to counteract intensified short‐selling pressures following the removal of a short‐selling constraint. We use a controlled experiment, the Regulation SHO pilot program, to find that changing the short‐selling rule brings small companies to increase cash dividends, but not to repurchase more shares. Because paying dividends is costly, it is acknowledged as a more reliable signal of stock undervaluation than share repurchase. While our evidence suggests that companies select this payout strategy to deter predatory short sellers, it also shows that a short‐selling activity has a causal effect on corporate payout decisions.