Despite the increasingly critical role of short sellers in corporate governance, limited research has explored which firms attract short sellers. This paper fills in this gap by examining the financial and non-financial antecedents of short selling activities. Specifically, we argue that firms with poor financial performance and high ESG disclosure quality may be perceived as having higher managerial opportunism within the firm, inducing higher perceived firm risk and thus more short selling activities. This effect should be more salient when a firm’s ESG engagement is more likely to be symbolic rather than substantive. Using a longitudinal dataset of 2,574 S&P 1500 firms between 2006 and 2019, our empirical analyses support our predictions. Our findings contribute to literature on corporate governance, in particular short selling.
