Restriction on the access to the public equity market and non-market based selection of public listing create overvaluation and distort managerial incentives in the public listed companies in the Chinese stock market. Using the sample of newly listed firms in the Growth Enterprise Market (GEM),...

How does short selling affect corporate decisions? To answer this question, we examine corporate investment decisions in a model with short selling. We show that high short selling activities can cause firms to overinvest and the agency problems between managers and shareholders are the driver...