How Does Short Selling Impact Firm’s Supply Chain Disruption Risk Disclosure?

Supply chain disruption (SCD) have emerged as a persistent source of operational and financial risk for firms worldwide. Yet current accounting standards mandate detailed or standardized disclosures of SCD risk, and prior research pays limited attention to how firms communicate such risk to capital markets. Using China’s short-selling pilot program as a quasi-natural experiment, we apply natural language processing techniques to Management Discussion and Analysis sections of listed firms’ annual reports to construct firm-level measure SCD risk disclosure. We then employ a staggered difference-in-differences (DiD) design to identify the causal effect of short-selling deregulation on firms’ SCD risk disclosure practices. We find that short-selling deregulation leads to a significant increase in firms’ SCD risk disclosure. This result is robust to a wide range of alternative specifications and sensitivity tests. Heterogeneity tests further show that the effect is stronger among firms with lower customer concentration and lower level of internationalization. Additional analyses indicate that the deregulation-induced increase in SCD risk disclosure is associated with a significant reduction in shareholder risk. We extends the supply chain risk literature by shifting the focus from risk exposure to risk disclosure and provides new evidence on how capital market pressure shapes firms’ disclosure strategies. These findings offer practical implications for firms seeking to improve risk disclosure in the presence of external market discipline.