The Governance Effect Of Short-selling

China's short selling trading system,established in 2010,has developed rapidly in recent years,meanwhile,the underlying securities have been steadily increasing,gradually satisfying the demand of bearish investors.From the unilateral market to the bilateral market,the emergence of short selling will have a certain impact on the market and enterprises.However,whether the effect is positive or negative,there seems to be different voices in both theoretical and practical worlds.According to the information asymmetry,the principal-agent,overconfidence theory,this paper takes China's A-share listed companies from 2006 to 2016 as a sample,with difference-in-differences(DID)model and the mediation effect test,and studies the influences and possible mechanisms of short selling transaction to the efficiency of investment of listed companies,the economic consequences of financial innovation are further discussed.The study found that short selling trading can reduce the inefficient investment of listed companies after the trading of short selling.According to the different mechanisms of inefficient investment,the constraint effect of short selling was discussed.The result shows that in the companies whose agency problem is more serious,short selling trading can inhibit over-investment and under-investment.In overconfident companies,the short selling trading has a significant inhibitory effect on over-investment,while has no obvious effect on the under-investment.In summary,the short selling trading has an external governance role.Finally,in order to avoid potential endogenous problems and make the results more credible,this paper also adopted the propensity score matching,use of companies that excluded the list,instrumental variable method,and other methods to test the hypothesis,the research conclusion of this paper is verified again.