Working Paper: CEPR ID: DP13788
Authors: Ian Appel; Jordan Bulka; Vyacheslav Fos
Abstract: Short selling campaigns by hedge funds have become increasingly common in the last decade. Using a hand-collected sample of 252 campaigns, we document abnormal returns for targets of approximately -7% around the announcement date. Firm stakeholders, including the media, plaintiffs' attorneys, and other short sellers, play an important role in campaigns. Changes in aggregate short interest do not drive the effects on firm value and stakeholder behavior. Campaigns are primarily undertaken by activist hedge funds. Evidence suggests disclosure costs and information are important channels through which activism technology affects short selling.
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Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| stakeholder behavior (G34) | effectiveness of short selling campaigns (G14) |
| changes in media coverage (L82) | firm value (G32) |
| active short selling campaigns (G24) | increase in litigation likelihood against firms (K41) |
| active short selling campaigns by hedge funds (G34) | negative cumulative abnormal returns (CARs) for target firms (G34) |
| active short selling campaigns (G24) | increase in aggregate short interest (G40) |
| active short selling campaigns (G24) | changes in media coverage (L82) |