Short selling and corporate earnings management

Abstract

This article empirically tests the impact of short selling mechanism on corporate earnings management level using data from companies other than the financial and real estate industries and ST companies from 2003 to 2023. This article constructs a model and also set multiple control variables. The results of the research show that between short selling and the level of earnings management of enterprises there is a negative correlation, that is, the stronger the short selling mechanism, the lower the level of earnings management of enterprises. At the same time, this study also shows that compared with other regions, in areas with a good legal environment, the negative correlation between short selling mechanism and corporate earnings management level is stronger. The innovation of this article lies in the use of data samples with longer time spans and the addition of annual dummy variables, providing new perspectives and directions for future research. Through this study, we hope to promote the development and improvement of short selling mechanisms, effectively prevent financial fraud caused by excessive earnings management levels of enterprises, and promote the development of the capital market.