Why Do Firms Disagree with Short Sellers? Managerial Myopia versus Private Information
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Final Accepted Manuscript
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Univ Arizona, Eller Coll ManagementIssue Date
2019-10-18
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CAMBRIDGE UNIV PRESSCitation
Bargeron, L., & Bonaime, A. (2020). Why do firms disagree with short sellers? Managerial myopia versus private information. Journal of Financial and Quantitative Analysis, 55(8), 2431-2465.Rights
Copyright © Michael G. Foster School of Business, University of Washington 2019.Collection Information
This item from the UA Faculty Publications collection is made available by the University of Arizona with support from the University of Arizona Libraries. If you have questions, please contact us at repository@u.library.arizona.edu.Abstract
Though short sellers on average succeed at identifying overvalued equity, firms often signal disagreement with short sellers by repurchasing stock when short interest increases. We investigate whether this disagreement reflects a myopic defense of inflated prices, or positive private information. These repurchases appear motivated by managers' private information, not agency issues, even when managerial benefits to short-termism are enhanced or monitoring is weaker. Managers' informational advantage relates to subsequent news, earnings, and risk, but is attenuated if activists target management or insiders sell. A trading strategy based on our findings earns 7.5% annually.ISSN
0022-1090EISSN
1756-6916Version
Final accepted manuscriptae974a485f413a2113503eed53cd6c53
10.1017/s0022109019000851