This paper presents evidence that firms choose conservative financial policies to mitigate firms’ exposure to short selling threat. I exploit changes in the regulation of short selling constraints as an exogenous shock to the short selling threat borne by firms. I find that higher short selling threat leads to decreased corporate leverage, particularly for firms facing greater expected short selling threats, for firms with higher financial distress risks, and for firms whose managers are more risk averse. The findings suggest that short selling threats have a significant impact on corporate financing decisions through changes in the costs of financial distress.

ABSTRACT We examine whether a stock price spillover effect spreads through the method of listing or country of origin and whether this spillover effect changes when investor sentiment shifts. Using a sample of fraud allegations against Chinese companies that became public through Chinese reverse mergers (CRMs), we investigate whether firms that experienced negative spillover effects on their stock prices are those from the same country and/or with the same method of listing as the firms accused of fraud. We first show that the negative spillover effect channeled through the firm's country of origin becomes stronger when investor sentiment about Chinese companies becomes pessimistic, as evinced by significant declines in the stock prices of non‐fraudulent Chinese companies, including both CRMs and Chinese IPOs. Second, we show that the negative spillover effects on CRMs are stronger than those on Chinese IPOs and non‐Chinese reverse mergers, suggesting that both country and listing method are applicable to CRMs. Our findings indicate that (i) investor sentiment plays an important role in the spillover process involving fraud allegations and (ii) while the two channels could coexist, negative spillover effects that spread through the country of origin play a more prominent role than those that spread through the method of listing.

In this study, we investigate whether and to what extent institutional shareholders' political values influence their investees' environmental disclosure and performance. Using employees' political donation data, we construct institutional investors' political ideology score, which higher (lower) value represents a more Republican- (Democratic)-leaning culture. We find that firms led by institutional shareholders with a more Republican-oriented political ideology are less likely to issue environmental reports. Such a negative effect is more pronounced for firms with institutional shareholders with long-term horizons, with high corporate Republican ideology scores, and without an environmental committee. We further find that institutional shareholders' Republican-oriented political values are negatively associated with their investee firms' environmental performance and green innovations. Overall, our results indicate that institutional shareholders' internal political polarization significantly influences corporate environmental disclosure policies.

ABSTRACT Sell-side analysts employ different benchmarks when defining their recommendations. A buy for some brokers means the stock is expected to outperform its industry, while for other brokers, it means the stock is expected to outperform the market or some return threshold. We show that these stated benchmarks have implications for the distribution of recommendations, price reactions to recommendations, and the investment value of recommendations. We conclude that, depending on the question, academics may need to account for the benchmarks when studying analysts' outputs, and investors may find the benchmarks beneficial in interpreting analysts' advice. JEL Classifications: G10; G24.