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Stock market effects of corporate malpractices and misconduct: Evidence from the short-seller Hindenburg

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  • Albuquerque, Bruno
  • Martins, António Miguel
  • Moutinho, Nuno

Abstract

This study used event study methodology to examine the impact Hindenburg Research short-seller reports on targeted firms. The results show negative abnormal returns in firms when those reports reveal bad news about malpractices and misconduct. Our results show a higher negative stock market reaction to the Hindenburg reports when target firms are small, have higher leverage, higher Tobin's Q, and corporate malpractice involves financial fraud. Our findings evidence that adverse information disclosed in the Hindenburg report led to a “torpedo effect”, resulted in sharp, immediate, and persistent share price drops.

Suggested Citation

  • Albuquerque, Bruno & Martins, António Miguel & Moutinho, Nuno, 2025. "Stock market effects of corporate malpractices and misconduct: Evidence from the short-seller Hindenburg," Finance Research Letters, Elsevier, vol. 72(C).
    • Handle: RePEc:eee:finlet:v:72:y:2025:i:c:s1544612324015241
    DOI: 10.1016/j.frl.2024.106495
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    More about this item

    Keywords

    Short-selling; Malpractices and misconduct; Financial market analysis; Event study; Abnormal returns;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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