In the 14th Five-Year Plan and the Long-Range Objectives Through the Year 2035, innovation-driven development is the key point during this period. With the gradual implementation of short selling, the impact of short selling on innovation quality is unclear. To empirically examine this issue, this study is based on using a sample of A-share firms of intellectual property (patent)-intensive industries and used time-varying difference in difference method. This study provides evidence The result indicate that short selling has negative effect on innovation quality, which means short selling would be reduces the innovation quality of intellectual property (patent)-intensive companies, and this effect lasts for at least a year. Moreover, the mediation test shows that short selling could exacerbate the principal-agent issue of those firms. Under the deterrence to be shorted, managers would make decisions that are not conducive to corporate innovation, leading to a reduction in the quality of innovation. This paper Further analysis clarifies the role of short selling on the innovation quality of intellectual property (patent)-intensive companies from the perspective of internal governance, which has theoretical support for analyzing the innovation and development of entity enterprises from the view of short-selling deterrence. More importantly, this study provides a local empirical evidence for the improvement of financial system in China has been provided.