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Multidisciplinary Business Review
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Multidisciplinary Business Review
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Multidisciplinary Business Review
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Equity Short Selling and the Cost of Debt

Authors: Ali Nejadmaleyeri; Bilal Erturk;

Equity Short Selling and the Cost of Debt

Abstract

Empirical evidence suggests that short sales have pertinent information about firm fundamentals. If so, then information from short selling in liquid equity markets can be informative for infrequently traded corporate bonds. The adverse information conveyed by short interest should mean higher cost of debt. Using a large sample of corporate bonds, we examine whether lagged equity short interest affects credit spreads. Highly shorted firms do experience wider credit spreads in the subsequent months. Moreover, the increase in short interest leads to higher credit spreads. Short interest thus seems to contain adverse information about firm fundamentals that can prove useful to bond investors. 

Related Organizations
Keywords

HF5001-6182, short selling, Management. Industrial management, Business, cost of debt, HD28-70, credit spread

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
2
Average
Average
Average
gold