A recent study of 383 recent short seller reports confirms that these whistleblowers are capable of affecting change:
A well-known example is Gotham City Research, which alleged in 2014 that the Spanish firm Let’s Gowex was perpetrating a massive accounting fraud. Let’s Gowex filed for voluntary insolvency five days after the whistleblower published a detailed report accusing it of misleading investors. Another example is Iceberg Research that, in 2015, started releasing a series of research reports targeting the (then) largest Asian commodity trader: Noble Group. The target firm subsequently booked large impairments, was downgraded by credit rating agencies, restructured its debt, and faced a 65% decline in its stock price in 2015 alone – confirming the original concerns raised by Iceberg.
Returns are squarely negative when the reports are published: -8.2% from Day -1 to 0, -11% from Day -1 to 1, and -2% the week after (from Day +1 to +5). However, firms may be able to stop the bleeding by responding to the Short Sellers (CARs are around 0% for about a month afterwards). Though, the relief is usually temporary:
Two months after the release of the first research report, CAR are significantly negative: -14.5%. [...] Negative CARs persist three months and six months after the publication of the first research report with CAR of -17.0% and -22.6%, respectively.
In addition, in August 2018, 46.3% of target firms are classified as either dead, delisted, or suspended from stock exchanges confirming the significant problems identified by WSSs.
Source: Paugam, Luc, Hervé Stolowy, and Yves Gendron. "Policing Financial Markets: An Analysis of Whistleblowing Short Sellers’ Rhetoric." 2019 [1891]