Short-sale constraints and the non-monotonic ambiguity–crash risk relation

摘要

Can firm-level ambiguity reduce crash risk when short selling is constrained? Ambiguity facilitates bad-news hoarding, raising crash risk, but also discourages ambiguity-averse investors from sustaining overvaluation when pessimistic beliefs cannot be expressed. During China’s market-wide short-sale ban, the ambiguity–crash risk relation is U-shaped among firms with limited analyst coverage but not among better-covered firms, though the cross-group difference is imprecise. The U-shape survives volatility and illiquidity controls and lower-tail trimming. After stocks become eligible for short selling, firms with higher pre-treatment ambiguity show more negative crash-risk responses, with no detectable differential pre-trend. Short-sale constraints and information production are boundary conditions.