The result in this study shows that the short selling fails to enhance the total goodwill’s value relevance. However, when the total goodwill is split into different elements, we observe that the short selling can significantly improve the expected goodwill’s value relevance both in the short and long time and improve the old goodwill’s value relevance in short term. Conversely, the short selling fails to enhance the value relevance of the unexpected goodwill and new goodwill regardless of the duration. The division of goodwill into different components helps to make it clear to stakeholders that only when the goodwill valuation is based on real economic factors and is recognized by the market and investors does it have value relevance in the face of short selling shock. Our study has important implications for enhancing capital market efficiency and is beneficial for policymakers and financial market participants.
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