Short Selling and Corporate Tax Avoidance: An Empirical Analysis Based on the Market Supervision Effect

Against the background of the increasing concealment of corporate tax avoidance behaviors, the market supervision value of the short selling mechanism has become increasingly prominent. Using Chinese A-share listed firms during 2016–2024 as the research sample, this paper leverages the quasi-natural experiment of phased expansion of margin trading and short selling. To start with, the staggered difference-in-differences approach is adopted to systematically explore the impact of short selling on corporate tax avoidance behaviors. The core explanatory variable "treat" is significantly negative at the 1% level, and the inhibitory effect remains robust after adding control variables, confirming that short selling can effectively constrain corporate tax avoidance behaviors; Secondly, heterogeneity analysis is carried out from three dimensions: enterprise scale, industry competition, and media supervision. It is found that the interaction terms between the three and short selling are all significantly negative at the 1% level, indicating that the inhibitory effect is more prominent in large enterprises and enterprises with strong industry competition, and media supervision can strengthen this effect; Thirdly, the reliability of the conclusions is verified through parallel trend test and placebo test, excluding potential interferences such as time trends and model settings; Finally, after considering other explanations, the research conclusions still hold.