The Impact of Short-selling Institutions on Chinese Stock Companies and MarketFrom the Case of Luckin Coffee

Abstract

As a major engine of the capital market, the stock market is favored by investors. But the huge profit space and operability are also easy to breed the soil of corruption and fraud. At present, due to the increased participation efficiency of short-selling institutions, the financial risks faced by enterprises have further increased. Through the case of Luckin coffee, we observe the stock price changes after it encountered short selling, combined with the model of the arbitrage pricing principle to find the role of short-selling institutions in the market. By disclosing corporate financial fraud, short-sellers can improve the effectiveness of market supervision to a certain extent, reduce the occurrence of stock market premiums, and bring stock prices back to their true levels. On the premise of ensuring the stability of the stock market and introducing a reasonable system, the Chinese market can also consider developing a similar mechanism to inject fresh blood into economic development.