The Research Of Response Strategy To Short Selling Crisis Of Chinese Companies

The listing of Chinese companies in the United States began in the 1990 s.The US capital market attracts Chinese companies in urgent need of funds with its perfect system,multi-level structure and low threshold.The Chinese concept stocks refer to these listing overseas Chinese companies' stocks.In the early days,only some high-quality state-owned enterprises were eligible for overseas financing due to related restrictions.With the further relaxation of the restrictions on the listing of private enterprises abroad in the early 21 st century,a group of emerging Chinese Internet companies have embarked on the journey of financing to the United States under the impetus of the Internet,and have also opened the prelude to the listing of Chinese private enterprises to the United States.The wave of listings in the US reached its climax in 2010 with 35 Chinese companies listed.Benefiting from the rapid development of China's economy,Chinese companies' stocks have been favored by international capital,which makes the Chinese companies gain a lot in the stock market.But such optimism did not last in 2010.Some of the RTO companies have attracted the attention of short-sellers due to the inability to submit financial statements on time and suspected of financial fraud by the media.Since the second half of 2010,they have been attacked by short-selling institutions,and the SEC subsequently intervened to investigate.According to incomplete statistics,from 2010 to 2011,a total of 67 Chinese companies were challenged by short-selling institutions.Among them,46 companies were suspended or delisted due to accounting violations and information disclosure issues.In the early stage of the short-selling storm,short-selling institutions successfully exposed financial fraud and major information disclosure issues,triggering a collective trust crisis against Chinese concept stocks.The short sellers use the market panic to further hunt down some well-founded Chinese companies' stocks.There is a strong subjectivity and tendency in short report and the evidence is thin,even including low-level mistakes for professional short sellers.Fortunately,after the accumulation of previous market experience,many high-quality Chinese companies have successfully deal with malicious short selling by adopting a variety of strategies.Based on the related literature review,this paper firstly combs the economic theory behind the typical short-selling in the crisis,then introduces the characteristics and influence of short-selling,the principles,strategies and processes of enterprise crisis management,and then outlines the collective trust crisis of the Chinese companies,and the risk characteristics of the short-sold companies,the impact of the stock price and the anti-short strategy were introduced.Then this article selects Spreadtrum Communications as a research case.It is the first time that Muddy Water has acknowledged the misunderstanding of the report after successfully attacking a number of Chinese stocks.Spreadtrum Communications quickly restored the stock price to the previous level.Since then,the stock price has risen 30% before it was short.It can be said that the crisis is a turning point.This paper analyzes the question of Spreadtrum communication being questioned,the reason for the malicious short-selling,and the anti-short strategy adopted.It is concluded that the successful anti-short is because the company has good fundamentals,stable financial operation.Another reason is that Spreadtrum Communications quickly adopted a variety of effective emergency strategies after the crisis and followed the principle of crisis public relations,giving clarification to investors and showing the company's value.Drawing on the successful experience of Spreadtrum Communications and combining the theory of crisis management,the author puts forward the strategy of Chinese companies to deal with short-selling crisis: the long-term fundamental strategy is to establish and improve corporate governance and improve information disclosure.The short-term emergency strategy is to use crisis public relations principles and implement feasible measure,the system strategy is to establish a sound short crisis management mechanism.In addition,the author made recommendations to relevant regulatory agencies and government departments to assist enterprises in dealing with malicious short selling.