Study On The Effect Of Short Selling Mechanism On Corporate Cash Holdings

The short-selling mechanism is an important mechanism to improve the capital market efficiency.China began implementing the short-selling mechanism since 2010.Companies in the short-selling list can be sold short.The short-selling mechanism has a major impact on the operation of the capital market.After the short-selling mechanism is implemented,market participants will further ly dig out effective information and actively sell short stocks that have a risk of decline.If the loss of being sold short is greater than the benefit obtained by the tunneling for shareholders,the cash holding will be reduced.Therefore,this paper explores whether the implementation of the short selling mechanism will have a deterrent effect on the enterprise.If it restrains the motivation of the shareholders and the management layers to gain personal interests,it will strengthen the internal governance of the enterprise and its own supervision and then reduce the firm's cash holdings.On the basis of previous scholars' research,this paper verif ies whether the short selling mechanism reduced cash holdings of enterprises,and furtherly investigates under the classification of internal governance,market environment and financing constraints.Using the natural experiment of opening up the short selling policy,this paper uses a variety of statistical methods,such as double difference method,group regression and fixed effect model.The study found that compared with those without short selling policy,the cash holdings of companies participating in short selling were significantly reduced.This effect is different effects for co mpanies with different characteristics.This paper first uses the principal component analysis method to divide the enterprise sample into a group with good internal governance and poor internal governance.The empirical study finds that the effect of the reduction of cash holdings is more significant for the enterprises with poor internal governance.Secondly,the empirical results show that the reduction effect of cash holdings is only significant in the enterprise sample group with smaller financing constraints.At last,we classifies enterprises according to the degree of marketization and found that the short selling mwchanism more significantly reduce the amount of cash holdings in the areas with high marketization,while that for low marketlization area is not significant.