סמינר במימון חשבונאות

Bernard Black, Northwestern University

During 2005-2007, the US Securities and Exchange Commission ran a randomized experiment, in which it removed short sale restrictions for some “treated” firms, ostensibly chosen at random, and left them in place for others.  The SEC experiment has been exploited by many finance and accounting scholars, who report evidence that removing short sale restrictions affected a wide range of financial outcomes, including market prices, firm investment strategy, accounting accruals, auditor behavior, innovation, and much more.  We show that the SEC busted its own randomization experiment, in a way which undermines most prior studies.  We discuss what one can and (often) cannot still learn from the SEC experiment, given how it was conducted.  We also develop reasons why relaxing short-sale restrictions was unlikely to affect most studied outcomes, at most studied firms.  We explain the need, when studying indirect effects of the SEC experiment, to account for nonrandom choices by short sellers on which firms to “target”, and the nonrandom choices by firm managers and other market participants on how to respond to removal of short sale restrictions.  We then revisit selected results from prior studies, and show that some are simply wrong and others are implausible.