Short Selling and Market Reactions to Penalties for Financial Violations
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2025-07-04
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en
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This thesis examines, how market reactions around penalties for financial violations in the United States. It does so, by mainly focusing on the level of short interest around the penalty dates, which is then followed by observing the trading patterns of company insiders around the event. To carry out the study, the thesis looks at penalties between 2018 to 2024, where the enforcing agency was the Securities and Exchange Commission. The thesis finds no significant buildup of short interest around a 20-month period before and after the event but finds a significant relationship between the relative size of the penalty and short interest in the month prior to the event. The paper also shows that while short sellers do not react to the event by building up their positions before, insiders do, by demonstrating increased level of selling activity right around the penalty announcement dates.
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Faculteit der Managementwetenschappen