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ON THE INFORMATIONAL EFFECT OF SHORT‐SALES CONSTRAINTS: EVIDENCE FROM THE TOKYO STOCK EXCHANGE
Author(s) -
Isaka Naoto
Publication year - 2007
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.2007.00223.x
Subject(s) - earnings , stock (firearms) , business , stock exchange , monetary economics , public information , negative information , finance , economics , mechanical engineering , public administration , political science , engineering , psychology , cognitive psychology
Using a database of stock lending fees for Japanese centralized margin transactions, I show that short‐sales constraints reduce the adjustment speed of stock prices to negative information before the announcements of revised earnings forecasts disclosed by firms in the Tokyo Stock Exchange from July 1998 to December 2001. I find that the cumulative abnormal returns (CARs) of the stocks with high short‐sales costs are insensitive to negative information on pre‐announcement days, but the CARs of these stocks become significantly lower than the CARs of the stocks with low short‐sales costs when the announcements reveal negative information to the public.