Abstract: By taking advantage of China’s quasi-natural experiments of introducing loose short-selling controls, this paper examines the impact of short selling mechanisms on corporate irregularities. The findings show that short selling mechanisms can inhibit corporate violations. Further research has found that good internal control can strengthen the suppression effect of short selling mechanism on corporate irregularities. Compared with state-owned enterprises, short selling mechanism has a stronger inhibitory effect on the irregularities of private enterprise.

Key words: to relax short selling control; company violations; internal control; nature of property rights