Short selling and stock returns: evidence from the first-day of listing on the STAR market

In this paper, we take a sample of 567 stocks listed in 2019– 2023 on the STAR Market, and explore the influencing factors of short selling behavior and its correlation with stock returns. Findings reveal that first-day short selling volume is significantly and negatively related to short-term stock performance, particularly in family firms and those with CEO duality. On the first-day of listing, short sellers tend to short stocks with higher proportion of shares outstanding and higher oversubscription ratio (especially the online oversubscription ratio). After a series of robustness tests, the conclusions still hold.