Risk Management and Accounting of Short Positions : Analysis of Challenges and Transparency in financial reporting

Background: Short selling contributes to market efficiency but also raises transparency and risk management challenges, particularly during periods of financial instability. Despite formal transparency requirements under IFRS, US GAAP, and UK GAAP, reporting practices vary considerably due to differences in standard structure and contextual discretion, making it difficult to ensure comparability and investor confidence. Purpose: This study aims to examine how financial firms demonstrate transparency regarding short-selling risks under IFRS, US GAAP, and UK GAAP, and how differences in these standards affect transparency. It also explores how firm characteristics and external pressures shape transparency practices. Method: Employing a mixed method approach, the study combines systematic content analysis of financial reports from firms operating under the three standards with semi-structured interviews with industry professionals. Institutional and stakeholder theories are applied to interpret how contextual and strategic factors shape transparency choices beyond technical compliance. Conclusion: The study finds that short-selling risk transparency varies notably across accounting standards, influenced not only by their structure but also by institutional and stakeholder pressures. While US GAAP promotes standardization, IFRS and UK GAAP allow more flexibility. Overall, transparency is shaped by a complex mix of regulation, market demands, and professional judgment.