|The coefficient on
RELSS in the benchmark period is negative and significant in model 5.
|In their 1993 work
Gerard and Nanda point out that restrictions on SS can be costly to issuers
if they constrain informed short sales. This implies that firms that normally
have higher level of relative short selling have smaller issue discounts
which is consistent with the literature that short sellers usually increase
|But firms with
higher relative short selling prior to the SEO have larger issue discounts,
supporting the view that short selling before the issue date is making prices
|To be able to
compare their results with prior literature the authors collect monthly short
interest data for their sample of SEOs and run analyses similar to those
carried out by Safieddine and Wilhelm. They find that consistent with prior
research there is no evidence of manipulative short selling. However they
continue to find that the coefficients on daily short selling to be
consistently positive and significant.
|They find no
relationship between monthly short interest rate and issue discount they do
find a consistent relationship between daily short selling and issue
|The lack of
evidence of manipulative trading in prior research is attributed to the lack
of power in the short interest data.
conclusion of this section ia that abnormally high levels of SS are related
to larger issue discounts.