The　objective　of　this　paper　is　to　explore　the　effect　of　short　selling　on　firm　investment　from　the　perspective　of　external　financing.　We　find　that　short　selling　makes　it　more　difficult　for　firms　to　finance　investment　projects　with　external　funds,　and　firms　react　to　this　exogenous　shock　by　reducing　their　investment.　The　effect　is　more　obvious　in　firms　with　lower　stock　price　synchronicity,　more　investment　in　innovation　projects　and　more　severe　internal　financing　constraints.　Moreover,　we　find　that　after　removing　short　selling　constraints,　the　value-added　effect　of　firm　investment　on　firm　value　is　enhanced.　©　2020,　©　2020　City　University　of　Hong　Kong　and　National　Taiwan　University.