Shelf versus traditional seasoned equity offerings: The impact of potential short selling

Marie Dutordoir, Norman Strong, Ping Sun

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Traditional seasoned equity offerings (SEOs) elicit short selling from traders trying to increase offering discounts. Such short selling is more difficult for shelf offerings because
the time between their announcement and issuance tends to be shorter. We predict and find
that firms with higher short-selling potential (SSP) are more likely to choose shelf over
traditional SEOs. This result is robust to alternative proxies for SSP and other sensitivity
tests. Further analysis suggests that shelf issuers aim to mitigate the threat of manipulative
short selling. Our findings add to a growing literature showing that short selling has a real
impact on corporate finance decisions.
Original languageEnglish
Article number54
Pages (from-to)1285-1311
Number of pages26
JournalJournal of Financial and Quantitative Analysis (JFQA)
Volume54
Issue number3
DOIs
Publication statusPublished - Jun 2019
Externally publishedYes

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