The Impact Mechanism of Short Selling on Major Shareholders' Tunneling Behavior
DOI:
https://doi.org/10.6981/FEM.202609_7(9).0016Keywords:
Deregulation of Short Selling; Tunneling; Exit Threat; External Monitoring.Abstract
Tunneling by major shareholders poses a significant challenge to China’s China's emerging capital market. As the capital market reform deepens, figuring out how to effectively curb such tunneling and protect minority investors has become crucial. This paper looks at whether relaxing short selling restrictions – an outside market force – can influence major shareholders' tunneling behavior. Our results show that the short selling mechanism can curb tunneling by strengthening minority shareholders' "exit threat," creating a synergy between market forces and internal corporate governance. This suggests that short selling works as an effective market-based tool to protect minority investors, providing empirical support for regulators who want to improve short selling rules.
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