This paper examines the short-term impact of short selling disclosure on individual
stock liquidity and its mechanism using a dynamic panel regression model and
Chinese Growth Enterprise Market data. The study results indicate that short
selling disclosure reduces the short-term liquidity of stocks and has a
significant impact on these stocks with high short selling ratio, high
circulating market value, low turnover rate and large amplitude, while it has
no significant impact on stocks with low short selling ratio, low circulating
market value, high turnover rate and small amplitude. This indirectly proves
that short selling trading is an informed transaction. These conclusions not
only supplement empirical evidence about the impact of short selling disclosure
on liquidity for the existing literature, but also provide some useful references
for securities market regulators to develop the short selling market and
improve the quality of the stock market.
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