Closing the deal: Managerial response to short sellers following M&A announcement

Wei Shi, David R. King, Brian L. Connelly

Research output: Contribution to journalArticlepeer-review

2 Scopus citations


When firms announce a merger or acquisition, shareholders, analysts, and the media respond. Firms are less likely to complete a deal when those reactions are negative. We, however, uncover a scenario where the opposite occurs. When short interest (i.e., the percentage of shares shorted) increases following announcement of a deal, managers at firms become more likely to complete the deal. We theorize that short selling after deal announcement constitutes an ego threat to managers that induces escalation of commitment. This is because short sellers are adversarial, or they win when stock prices fall. Moreover, we argue that this managerial response is heightened in situations where managers are more likely to be defensive about their decisions, such as when the deal is large or the target firm is publicly-traded. Our empirical findings lend support to the arguments.

Original languageEnglish (US)
Pages (from-to)188-199
Number of pages12
JournalJournal of Business Research
StatePublished - Jun 2021
Externally publishedYes

ASJC Scopus subject areas

  • Marketing


Dive into the research topics of 'Closing the deal: Managerial response to short sellers following M&A announcement'. Together they form a unique fingerprint.

Cite this