Activism short selling: impacto nos retornos das ações, aquisição de superioridade informacional e seleção de alvos

Abstract

This research investigates activism short selling, a form of short selling in which investors not only take short positions but also release critical reports about target firms, seeking to trigger declines in their stock prices. The study aims to understand which criteria and information sources guide activist short sellers (ACSS) in target selection and to evaluate the impact of their disclosures on stock returns. To this end, a documentary analysis of ACSS reports from 2017 to 2023 was conducted, complemented by statistical analyses, including mean difference tests, logistic regression, and event study methodology. The documentary analysis revealed that the issues most frequently identified by ACSS in their targets include fraud and poor accounting quality, legal risks, deficiencies in business models, managers with a poor track record, stock price manipulation, concerns related to independent auditing, and financial distress. To identify these red flags, ACSS combine private data with complexly processed public information, consistent with the Limited Attention Theory. Econometric tests showed that variables related to low accounting quality, low profitability, and low dividend payout increase the likelihood of a firm being targeted by ACSS. Moreover, the event study confirms that the disclosure of these reports generates significant and persistent negative abnormal returns in the stock prices of target companies. The study concludes that ACSS play a relevant role as private mechanisms of monitoring and fraud detection, thereby contributing to market efficiency. The findings provide practical implications for investment managers, regulators, auditors, and professionals engaged in fraud prevention, by offering evidence of the risk factors that make companies more vulnerable to activism short selling campaigns, as well as identifying techniques and sources of information useful for detecting fraud and other irregularities.