As the capital market pressure, short-selling threat has an important impact on corporate innovation. Based on the data of domestic listed companies from 2007 to 2018, this paper uses the introduction of short-selling system as a quasi-natural experiment, discusses the relationship between short-selling threat and corporate innovation based on the difference in differences model. This paper also tests the moderating effect of TMT characteristics (functional experience heterogeneity) and external environment (industry competitiveness) on the above relationship, and further investigates the mechanism of short-selling threat. The results show that the threat of short selling significantly improves the level of corporate innovation. The heterogeneity of TMT functional experience will strengthen the positive relationship between short-selling threat and corporate innovation, while industry competitiveness will weaken the relationship. It is found that the mechanism of short-selling threat affecting corporate innovation includes not only corporate governance mechanism, but also information mechanism. In addition, this paper also found that the threat of short selling is more obvious to enhance the level of innovation of mature enterprises and state-owned enterprises. This conclusion not only enriches the research framework of antecedents of corporate innovation, but also provides an important reference for enterprises to effectively deal with the threat of short selling.