Public Short Selling by Activist Hedge Funds

55 Pages Posted: 12 Sep 2018 Last revised: 3 Feb 2019

See all articles by Ian Appel

Ian Appel

Boston College - Carroll School of Management

Jordan Bulka

Boston College, Carroll School of Management

Vyacheslav Fos

Boston College - Department of Finance; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Date Written: February 1, 2019

Abstract

Using a hand-collected sample of 290 public short selling campaigns, we show that voluntary disclosure of short positions by activist hedge funds has increased significantly in the last decade. Targets of short campaigns experience abnormal returns of approximately -7% around the announcement date. Campaigns are also associated with changes in the behavior of other stakeholders (e.g., litigation) that potentially harm targets. Both changes in targets' valuations and stakeholder behavior are not explained by changes in short interest, suggesting that public short campaigns differ from non-public short sales. We consider two economic mechanisms that potentially explain this behavior: information acquisition synergies and the ability to engage in "short investor activism."

Keywords: Activist Hedge Funds, Short Selling

Suggested Citation

Appel, Ian and Bulka, Jordan and Fos, Vyacheslav, Public Short Selling by Activist Hedge Funds (February 1, 2019). Available at SSRN: https://ssrn.com/abstract=3242516 or http://dx.doi.org/10.2139/ssrn.3242516

Ian Appel (Contact Author)

Boston College - Carroll School of Management ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

Jordan Bulka

Boston College, Carroll School of Management ( email )

Boston, MA
United States

Vyacheslav Fos

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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