We examine how U.S.-China geopolitical tensions affect the informational role of activist short sellers. Using hand-collected data on 183 reports targeting U.S.-listed Chinese firms from 2010 to 2020, we find that campaign activity increases during high-tension periods, driven by follow-up reports on already-targeted firms rather than new investigations. Reports released during these periods contain more negative language, are associated with larger but reversing price declines, and include fraud allegations less likely to be verified. These patterns suggest that geopolitical tensions shift activist short selling from price discovery toward bear-raid-type activity.

Using a novel dataset of firm product introductions, we examine whether public short campaigns (PSCs) have real impacts on targets. Targets introduce fewer new products and experience declines in productivity and product quality relative to matched firms following PSCs. These declines in product outcomes are partly attributed to the withdrawal of support from key stakeholders, resulting in reduced access to external capital, decreased employee commitment, and weakened customer relationships. Our results suggest that the public nature of PSCs has distinctive impacts on target firms compared to traditional short selling, primarily through their impact on the firm's stakeholders.

Boards are crucial to shareholder wealth. Yet little is known about how shareholder oversight affects director incentives. Using exogenous shocks to institutional investor portfolios, we find that institutional investor distraction weakens board oversight. Distracted institutions are less likely to discipline ineffective directors with negative votes. Consequently, independent directors face weaker monitoring incentives and exhibit poor board performance; ineffective independent directors are also more frequently appointed. Moreover, we find that the adverse effects of investor distraction on various corporate governance outcomes are stronger among firms with problematic directors. Our findings suggest that institutional investor monitoring creates important director incentives to monitor.