Short Selling Around Seasoned Equity Offerings


	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 price efficiency.
	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 less informative.

	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 discount.

	The lack of evidence of manipulative trading in prior research is attributed to the lack of power in the short interest data.

	The primary conclusion of this section ia that abnormally high levels of SS are related to larger issue discounts.