Responding to Activist Short Sellers: Allegations, Firm Responses, and Outcomes

56 Pages Posted: 15 Jul 2020 Last revised: 22 Feb 2021

See all articles by Janja Brendel

Janja Brendel

Humboldt-Universität zu Berlin

James Ryans

London Business School

Multiple version iconThere are 2 versions of this paper

Date Written: February 21, 2020


This study provides descriptive evidence on how firms respond to activist short seller reports and how these responses are associated with outcomes for the targeted firms. We show that the frequency of these reports has grown substantially in recent years. While we find that firms respond only 31% of the time, this rate increases substantially when the report is accompanied by significantly negative abnormal returns and when the report contains new evidence. Not responding is associated with a less negative stock price response at report release and fewer adverse outcomes. Firms that launch internal investigations following the report release have significantly higher subsequent rates of stock exchange delisting and SEC enforcement actions, and lower rates of being acquired. Overall, our results highlight the impact of activist short sellers on target firms and that firm responses are associated with material outcomes.

Keywords: activist short sellers; internal investigations; fraud; voluntary disclosure; delisting; restatements

JEL Classification: D82; G14; G34; M41; M42; M48

Suggested Citation

Brendel, Janja and Ryans, James, Responding to Activist Short Sellers: Allegations, Firm Responses, and Outcomes (February 21, 2020). Available at SSRN: or

Janja Brendel

Humboldt-Universität zu Berlin ( email )

Spandauer Str. 1
Berlin, D-10099

James Ryans (Contact Author)

London Business School ( email )

Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom


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