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This study examines the impact of short selling on firm-level employment growth. Exploiting the staggered short-sale deregulation in China, we find that short selling has a significant negative effect on employment growth. We establish causality by applying a propensity score matching difference-in-differences (PSM-DiD) method and an instrumental variable (IV) approach. Exploring the underlying mechanisms, we find that financial constraints, information transparency, and agency costs are three plausible channels by which short selling affects employment growth. Furthermore, a series of cross-sectional tests suggest that the effect of short selling on employment growth is concentrated in non-state-owned enterprises (non-SOEs), firms with higher operating risk, firms with lower governance quality, firms in regions with weaker labor protection, and in periods prior to the Covid-19 pandemic. Overall, our study offers novel evidence on the consequences of short selling on employment growth in an emerging market, complementing the literature on short sales and labor market outcomes. [ABSTRACT FROM AUTHOR]