In this paper, we analyzed the financial characteristics of listed companies in the domestic capital market that are a subject of short selling.
Short selling is an ongoing controversy. Capital market participants and researchers have conflicting views on short selling. Whether a short selling should be regarded as a justifiable investment method or not, but principally, public opinion has a negative view. However, the short selling has many merits such as it provides liquidities to the stock market, it would be a new investment device to investors, and hedging device as well.
Despite conflicting views on the matter, usually, there are not relative long-term empirical studies on short selling. So it''s difficult to generalize. And then, we analyzed using the actual trading data for the period from 2008 to 2017.
More precisely, the objective of this study is to confirm the financial characteristics of listed companies in the domestic capital market and through this data, we investigate whether short selling is a speculative motive transaction in Korean stock market. Therefore, this study analyzed the relationship between short selling volume and financial variables using data on daily short selling in the domestic capital market from 2008 to 2017.
The results of the analysis are as follow. First, we find a statistically significant negative relationship between short selling volume and △X, △ATO, LEV, Dummy_n, STD_Dr, Large. Second, we find a statistically significant positive relationship between short selling volume and PER, MTB, SIZE, CARt-1, KOSPI200, KOSDAQ100, FOR. The results imply that it is possible to disprove short selling is not a speculative investment through short seller use accounting information.
This study is expected to confirm the financial characteristics of companies that conduct short selling, to provide a foundation for related follow-up studies, to aid the decisions of investors, establishment, and application of short sales related system of financial authorities in the future.