We identify the causal effects of short-selling bans on stock prices using regression discontinuity (RD). We exploit three threshold-based rules that determine a stock’s short-selling eligibility on the Hong Kong Stock Exchange. Short-selling bans have a large effect on short-selling volume at all thresholds. Despite this, bans do not affect stock prices. Stock returns, volatility, and crash risk are not different for banned versus unrestricted stocks when appropriate counterfactual stocks are used to measure a ban’s effects. Our findings suggest that short-selling bans are not as costly as previously argued, but are ineffective at reducing volatility or buttressing prices. Received September 13, 2017; editorial decision April 29, 2018 by Editor Jeffrey Pontiff.

We examine how language barriers affect the capital market reaction to information disclosures. Using transcripts from non-U.S. firms' English-language conference calls, we find that the calls of firms in countries with greater language barriers are more likely to contain non-plain English and erroneous expressions. For non-U.S. firms that hire an English-speaking manager, we find less use of non-plain English and fewer erroneous expressions. Calls with a greater use of non-plain English and more erroneous expressions show lower intraday price movement and trading volume. The capital market responses to non-plain English and erroneous expressions are more negative when the firm is located in a non-English-speaking country and has more English-speaking analysts participating in the call. Our results highlight that, when disclosure happens verbally, language barriers between speakers and listeners affect its transparency, which, in turn, impacts the market's reaction.

This study adopts a two‐step approach to highlight the disclosure quality channel that drives economic consequences of IFRS adoption. This approach helps address the identification challenge noted by prior research and offers direct evidence on the role of disclosure quality. In the first step, we document the impact of the IFRS mandate on changes in disclosure quality proxied by the granularity of line item disclosure in financial statements. We find that IFRS‐adopting firms provide more disaggregated information upon IFRS adoption, such as more granular disclosure of intangible assets and long‐term investments on the balance sheet and greater disaggregation of depreciation, amortization, and nonoperating income items on the income statement. In the second step, we link the observed disclosure changes to the benefits and costs of IFRS adoption. We show that greater disaggregated information due to IFRS adoption enhances market liquidity and decreases information asymmetry, but does not affect audit fees differentially. Our evidence has implications for standard setters as they evaluate cost‐benefit trade‐offs when considering disclosure changes in the future.

We examine how managers' ethnic cultural background affects their communication with investors. Using earnings conference calls with executives from 42 countries, we find that managers from ethnic groups that have a more individualistic culture use a more optimistic tone and exhibit greater self-reference. Managers' ethnic culture has a lasting effect and persists for executives whose work experience later exposes them to different ethnic cultures. The effect of ethnic heritage is observed in dialogues that reflect real-time interactions (i.e., Q&A ) and is less pronounced in the scripted, less spontaneous portion of the calls (i.e., management discussion). Analysts respond positively to optimistic tone, but only those who share the manager's ethnic background adjust their earnings forecasts for the cultural component of managerial tone. The findings suggest that managers' ethnic background has a significant effect on how they communicate with the capital market and how the market responds to the disclosure.