Abstract: To explore the main cause of the recent shorting crisis of China concept stocks in international stock markets, this article examines the effects of shorting reports on the prices of China concept stocks in the short and long term respectively using the event study method, and explores the main causes of trust crisis in China concept stocks. The results show that, shorting reports have significantly negative effects on the prices of China concept stocks in the short term, and in general have significantly negative effects on the prices of China concept stocks in the long term though in a few cases the reports exert significantly positive influence. In the long term, the stock price rises gradually, forming the remarkable positive effect. Therefore, most China concept stocks shorted are really problematic, and the fall in their prices is mainly due to normal market reactions instead of vicious shorting activities. Therefore, it is necessary for China′s securities regulatory authorities to make a careful screening of China concept stocks companies of “returnees”.

Key words: China concept stocks, shorting, event study, efficient market