Does Short Selling Pressure Discipline the Executive Perquisites: Evidence from a Nature Experiment on Margin Trading in China

Abstract

Abstract:

This paper examines the effect of short selling pressure exerted under the securities margin trading system on the executive perquisites in China. Using the data of Chinese publicly-listed companies for the period 2007 to 2014, we test the effect with the differ-ence-in-differences model within the framework of natural experiment, and find that short selling pressure can discipline the executive perquisites and the level of executive perquisites decreases more significantly in the companies allowed for short selling. Further research shows that short selling pressure disciplines the executive perquisites by alleviating the degree of information asymmetry and reducing the principal-agent problem. This means that short selling is a kind of potential external governance mechanism for executive perquisites.

Key words: short selling, perquisites, margin trading, discipline effect, difference-in-differences model

Liu Fei, Du Jianhua, Chao Bian. Does Short Selling Pressure Discipline the Executive Perquisites: Evidence from a Nature Experiment on Margin Trading in China[J]. , 2020, 32(1): 40-55.

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