Policing financial markets: the rhetorical battle of new whistleblowers

How do market participants police companies listed on financial markets?

  • Wed 5 Dec 18

    13:30 - 15:30

  • Colchester Campus


  • Event speaker

    Prof Hervé Stolowy

  • Event type

    Lectures, talks and seminars

  • Event organiser

    Essex Business School

  • Contact details

    Dr Diogenis Baboukardos

The aim of the Essex Accounting Centre (EAC) research seminar series is to support our world-class research activities in four key areas: social responsibility and corporate governance; (management) accounting change (in privatised, public and third sectors); global development, corruption and accountability; and reporting, regulation and capital markets. The seminar series is also expected to promote inter-disciplinary research that links the work of members of the centre with others both within the university and with external institutions.

Seminar Abstract 

How do market participants police companies listed on financial markets?

We investigate, in this respect, the role of New Whistleblowers, i.e., activist short-selling organisations that target publicly listed firms that they perceive to be overvalued, in an increasingly popular form of “research reports” openly denouncing frauds, flawed business models, accounting irregularities or wrongdoings.

We assume that New Whistleblowers’ policing takes place through a rhetorical battle surrounding the persuasiveness of allegations conveyed especially in such research reports, and counter-claims formulated by targeted companies in trying to rebut allegations.

Our empirical analysis exploits 388 research reports, first-hand and second-hand interviews with New Whistleblowers as well as videos.

We also investigate counter-claims produced by targeted firms in 303 documents that respond to New Whistleblowers’ allegations.

Drawing on Aristotle’s rhetoric, we seek to understand better how New Whistleblowers use narratives to convince other investors that target firms are overvalued, and how target firms reply and defend their actions.

We decompose the documents produced by New Whistleblowers and target firms into stylised narratives related to credibility-based (ethos), emotions-based (pathos) and logic-based (logos) rhetorical strategies.

To assess the effectiveness of New Whistleblowers’ claims and the ability of target firms to effectively defend their position we use an event study surrounding the disclosure dates of New Whistleblowers’ research reports and dates of target firms’ responses.

We document that New Whistleblowers’ attacks are particularly persuasive as we find evidence of significantly negative stock returns around the publication of research reports. Conversely, we do not find significant evidence that target firms are able to convince investors that the allegations are false.

Our study therefore points to New Whistleblowers playing a significant role in policing financial markets; their role is all the more pertinent given gatekeepers’ difficulties in monitoring fraudulent behaviour in financial markets.


This is an open event; there is no need to book. Please feel free to attend and bring your colleagues, classmates and friends.

Speaker bios

Hervé Stolowy is Professor of Accounting and Management Control at HEC Paris. He holds a Degree in Business Administration (ESCP Europe), a Master's degree in Law (University Paris-Val de Marne), a B.A. in Russian and American Studies (University Paris-Sorbonne), a Ph.D. in Financial Accounting (University Paris-Panthéon-Sorbonne) and an "Habilitation à diriger des recherches" ("Qualified Doctoral Dissertation Supervisor").

He is a certified "expert comptable" (French equivalent of a chartered accountant or certified public accountant).

He has authored and co-authored nine books (including "Financial Accounting and Reporting - A Global Perspective", Cengage, Andover, UK, 5th edition, 2017, in collaboration with Yuan Ding), chapters in 10 collective works and published over 65 articles in academic and applied journals (Abacus, Accounting Auditing & Accountability Journal, Accounting, Organisations and Society, Advances in International Accounting, Contemporary Accounting Research, Comptabilité - Contrôle - Audit, European Accounting Review, Finance - Contrôle - Stratégie, Journal of International Business Studies, The International Journal of Accounting, Issues in Accounting Education, Journal of Accounting and Public Policy, Les Echos, Review of Accounting and Finance, Revue de Droit Comptable and Revue Française de Comptabilité).

His research and teaching interests span financial and international accounting, and focus more specifically on accounts manipulation, intangibles, international accounting harmonisation and cash flow statements.

He is a member of the Association Francophone de Comptabilité (AFC), European Accounting Association (EAA), American Accounting Association (AAA), and Canadian Academic Accounting Association (CAAA).

He is past president of AFC, past co-Editor of Comptabilité - Contrôle - Audit, past chair of the Standing Scientific Committee of the European Accounting Association and current Editor of European Accounting Review. Hervé Stolowy teaches financial accounting in the different graduate programs of HEC Paris: introduction to financial accounting and financial statement analysis (HEC-MBA Program and HEC Master of Science in Management - Grande Ecole), and both advanced accounting and international accounting (HEC MSc in Management Grande Ecole).

He also teaches in the HEC doctoral program (research in financial accounting) and supervises several Ph.D. students.

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