The Impact of the Short Selling Mechanism on the Investment Efficiency of Small and Medium-sized Enterprises

Shuran Yang

doi:10.6981/FEM.202506_6(6).0001

Authors

Shuran Yang

DOI:

https://doi.org/10.6981/FEM.202506_6(6).0001

Keywords:

Short Selling Mechanism; Investment Efficiency; Small and Medium-sized Enterprises.

Abstract

This paper selects data on listed SMEs in A-share market from 2012 to 2022, and uses the empirical research method to explore and prove impact of short sales mechanism on the investment efficiency of enterprises. The short selling intensity and the difference-in-differences method are used as tools to measure the short selling mechanism, and the impact of the short selling mechanism on the investment efficiency of small and medium-sized enterprises under different internal governance levels is analyzed. Then, the robustness and heterogeneity analysis are carried out to analyze the role of the short selling mechanism in bull and bear markets. This paper finds that compared with enterprises that are not allowed to short sell, the investment efficiency of shortable enterprises improves after they are allowed to short sell. Furthermore, upon further refinement, it is found that how the short selling mechanism influences the investment efficiency within enterprises is more in curbing over-investment rather than under-investment. Furthermore, in contrast to enterprises boasting a high standard of internal governance, the short selling mechanism exerts a more pronounced impact on those with a defective internal governance structure, especially in terms of suppressing over-investment. Therefore, continuing to liberalize the securities lending business and improving its relevant systems can give full play to the corporate governance role of short selling in China's capital market.

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