Can Shorting Curb Major Shareholder Hollowing Out

Jingxi Xu

doi:10.6981/FEM.202511_6(11).0022

Authors

Jingxi Xu

DOI:

https://doi.org/10.6981/FEM.202511_6(11).0022

Keywords:

Short-selling Mechanism; Major Shareholder Short-selling; Capital Misappropriation; Short-selling Deregulation; Corporate Governance; External Oversight.

Abstract

This paper studies the external supervisory and restrictive role of short-selling deregulation, focusing on major shareholders' "hollowing out" in China's corporate governance. Theoretically, post-deregulation, small and medium shareholders can short to lower stock prices; when hollowing gains are less than price fall losses, major shareholders' behavior is restrained. Using 2008-2020 A-share data, empirical analysis shows short-selling deregulation significantly reduces major shareholders' fund occupation proportion, with more obvious effects in weakly governed companies like private enterprises and those with high shareholding concentration. This indicates the short-selling mechanism protects minority shareholders' interests via market-based supervision, providing empirical evidence for regulators to optimize short-selling policies and improve corporate governance.

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