Abstract: The legalization of short selling in China′s securities market has been nearly ten years. However, the existence of early short selling constraints makes the mechanism controversial on the governance of listed companies.Based on the quasi natural experimental window of refinancing system, this paper takes A-share listed companies in China from 2014 to 2016 as the research sample, uses the tendency score matching method to eliminate the sample selection bias, tests the impact of the deterrence effect of short selling on earnings quality through the earnings response coefficient model under the condition that the constraints of short selling are greatly relieved, and analyzes the different property rights and equity effect and difference of influence under structure.The results show that the mitigation of short selling has a positive external governance effect, and the potential short selling opportunity has a typical deterrent effect in advance, which can effectively inhibit earnings manipulation and improve earnings quality; but for companies with different property rights and ownership structure, the governance effect of short selling mechanism has different impacts on earnings quality. The above conclusions provide different perspectives for the test of the governance effect of short selling on listed companies, and provide adjustment ideas and directions for the promotion and improvement of the system of refinancing securities.

Key words: refinancing, short selling mechanism, earnings quality, propensity score matching method