The Impact of Short Selling Disclosure Regulatory Constraint on the Lending Market and Stock Ownership

We examine the impact of the short sell disclosure (SSD) regime on the stock lending market and investor behaviors, employing a staggered difference-indifference (DiD) methodology. Our research reveals that the introduction of the disclosure regime enhances market transparency, resulting in a diminished appeal of stock ownership in the lending market for active investors. This shift is accompanied by a reduction in information leakage risks and longer loan durations. Specifically, our analysis reveals a significant decrease in the risk of loan recall by 4.87%, accompanied by an average increase of 23.72% in loan duration for short selling activities. Furthermore, the cost associated with short-sell disclosure causes a decline in both lending supply and short demand.