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How Corporate Credit Ratings are Affected by Short-Selling Policy

Author(s)

Yixin Peng

Affiliation(s)

Nanjing Audit University, Nanjing, Jiangsu, China

Abstract

As an important economic reform system in the capital market, does the shorting system have an impact on the adjustment of corporate credit ratings? Based on the data of A-share listed companies in China's Shanghai and Shenzhen markets from 2006 to 2023, this paper evaluates the impact of the short-selling mechanism on corporate credit ratings using a multi-temporal double-difference model, and conducts a series of robustness tests and heterogeneity analysis. The study finds that (1) the short-selling mechanism can have a positive effect on the improvement of corporate credit ratings, which proves that China's asset market is progressing due to the short-selling mechanism. (2) The shorting policy can enhance the disclosure quality of enterprises' information, which can lead to the improvement of corporate credit rating. (3) The greater the intensity of shorting, the greater the effect on the improvement of corporate credit rating. (4) For regions with higher social credit level, the greater the affect of shorting policy on the improvement of corporate credit rating.

Keywords

Short Selling; Credit Rating; Quality of Disclosure; Supervisory Role

References

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