Study On The Phenomenon Of Shorting China-Concept Stock

China’s economy maintained rapid growth for many years since the reform and opening up. Correspondingly, the strength of Chinese enterprises has been enhanced. In the process of enterprise development, the demand of funds is an essential factor. Overseas financing especially listing abroad becomes a first choice of many Chinese companies. But since the end of 2010, China-concept stocks suffered a collective "trust crisis" that multiple agencies represented by Citron, Muddy waters released several short reports attacking China-concept stocks. Since then, the operation of intermediary institutions and the strengthening of the US Securities and Exchange Commission’s supervision make this storm intensified. Then why would China-concept stocks be short? How would they be short? What is the specific effect of shorting? Research on these issues has theoretical and practical significance.This article examines effectiveness of the short report respectively in short term and long term under the method of event study and analyzes their similarities and differences by comparing for deeper understanding. The research results show that, for the entire sample the short report has a significantly negative effect on the stock prices of China-concept stocks in the short term which means that short report is effective and it’s the same in the long term. However, for the single sample, the effects of the short report on China-concept stock prices are intricate, depending on the specific situation of the company. In addition, we further apply the method of case analysis profoundly reveals the cause of the phenomenon, the characteristic of the short report, the investigation method and other problems that contribute to the comprehensive understanding of shorting phenomenon. In addition, we take Qihu360 and China Media Express Holdings as examples to illustrate the process and the non-stock market performance to prove the effectiveness of short report. Finally, we derived some enlightenment from three aspects about listed companies, intermediary institutions and regulators regarding the conclusion.