The effect of activist short seller research reports on stock price

Abstract

The purpose of this study is to investigate the effect of short seller research reports on prices of stocks that are traded at Hong Kong Stock Exchange. The study collects 17 activist short-selling cases that initiated by Blue Orca Capital, J Capital Research, Bonitas Research and Muddy Waters Research from 2014 to 2019. The study observes negative abnormal return in each of the 20 days after the publication date. The targeted companies’ stocks will experience a negative cumulative abnormal return in the approximate one or two months after the publication date. The findings of the study support the argument that short seller research reports have a great negative influence on targeted companies’ stocks that are traded at Hong Kong Stock Exchange. The results suggest that activist short sellers have been made profit by trading before the publication day of short sellers research reports and that the decision based on the information released on short seller research reports may not benefit investors.