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Short seller, firm, and auditor behavior

Global Business and Finance Review, 2021, 26(3), , pp.51-67 [Peer Reviewed Journal]

2021. This work is licensed under https://creativecommons.org/licenses/by-nc/4.0/ (the “License”). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License. ;ISSN: 2384-1648 ;ISSN: 1088-6931 ;EISSN: 2384-1648 ;DOI: 10.17549/gbfr.2021.26.3.51

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  • Title:
    Short seller, firm, and auditor behavior
  • Author: Chun, Jongeun ; Yang, Joonsun
  • Subjects: Audit effort ; Audit fee ; Audit fees ; Audit risk ; Behavior ; Earnings management ; Short sales ; Short selling ; 경영학
  • Is Part Of: Global Business and Finance Review, 2021, 26(3), , pp.51-67
  • Description: Purpose: Although a small part of arbitrage trading, short selling has a significant impact on capital markets. This study empirically examines relationships among short selling, earnings managements, and auditor behaviors. Design/methodology/approach: We employed short selling and abnormal short selling as independent variables. Audit hours, audit fees, and (absolute) value of discretionary accruals as dependent variables. In this study, we basically include ordinary least-squares regression analyses using panel data and interaction analyses. Findings: This study verifies the relationship among short selling, firm earnings management, and auditor behavior, showing positive relationships between short selling and current and future audit fees, audit hours, and current audit quality. Further, higher audit risk, caused by the interaction between abnormal short selling and aggressive earnings management, is reflected in future audit fees and hours. Research limitations/implications: Due to the financial data provided on an annual basis, the daily short selling data was aggregated on an annual basis. This study suggests that short selling is related to firm earnings management behavior, as well as to the auditor behaviors. Therefore, regulators should consider the impacts of short selling on company and auditors as well as investors. Originality/value: This study provides evidence that the positive relationship between short selling and audit fee is not only caused by risk-premium channels, but also by audit-effort channels. Furthermore, we find that the interaction effects of short selling and earnings managements occur only in abnormal short selling. This seemed to impose penalties on short selling exceeding forecasts when auditors considered earnings managements and short selling at the same time.
  • Publisher: Seoul: People & Global Business Association (P&GBA)
  • Language: English
  • Identifier: ISSN: 2384-1648
    ISSN: 1088-6931
    EISSN: 2384-1648
    DOI: 10.17549/gbfr.2021.26.3.51
  • Source: Open Access: DOAJ Directory of Open Access Journals
    AUTh Library subscriptions: ProQuest Central
    Alma/SFX Local Collection
    Coronavirus Research Database
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