Market manipulation and innovation

Cumming, Douglas J.; Ji, Shan; Peter, Rejo; Tarsalewska, Monika

doi:10.1016/j.jbankfin.2020.105957

Cited by 38 publications

(11 citation statements)

References 95 publications

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“…8 More precisely, we provide novel empirical evidence on the real effects of three specific security market reforms: insider trading enforcement, the EU transparency directives, and IFRS adoption. In this way, our work is among a small number of concurrent studies that explore how particular legal reforms influence technological innovation and other real outcomes (e.g., Chen et al, 2014;Cumming, Ji, and Peter, 2016). In particular, Levine, Lin, and Wei (2016) focus specifically on the link between insider trading and innovation.…”

Section: Empirical Strategymentioning

confidence: 99%

Does Transparency Stifle or Facilitate Innovation?

2019

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Corporate transparency reduces information asymmetries between firms and capital markets, but increases the costs associated with information leakage to competitors. We explore how a country's information environment affects innovation, an activity characterized by high information asymmetries and potentially severe proprietary costs. Studying both long-run cross-country differences in the availability of firm-specific information to corporate outsiders, as well as quasiexperimental shocks to the information environment following transparency-enhancing security market reforms, we document significantly higher rates of R&D and patenting in richer information environments. The effects of transparency are strongest in industries that rely on external equity rather than bank debt, indicating that transparency facilitates innovation by reducing the information costs associated with arm's-length financing. In contrast, transparency has no impact on physical capital accumulation, consistent with fewer information asymmetries in tangible assets. An economy's information environment has important but heterogeneous effects on the nature and extent of real economic activity.

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Section: Empirical Strategymentioning

confidence: 99%

Does Transparency Stifle or Facilitate Innovation?

2019

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“…There have also been many studies on the harmful effects of price manipulation on society and investors. Cumming et al (2020) analyze an 8‐year sample of suspected stock price manipulation events based on intraday data for equities from nine nations and find evidence of market manipulation's negative consequences on innovation. Firms engaging in managerial manipulation may also damage a company's equity value and reduce the level of research and development (R&D) expenditure (Marciukaityte & Varma, 2008).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Some researchers indicate that stock price manipulation has significant negative effects on society, such as net disinvestment, harm to innovation, the destruction of jobs, and the exploitation of workers (e.g., Cumming et al, 2020; Steven, 2017). Other researchers find that stock price manipulation harms individual investors and the market by causing unfair pricing, market distortion, and a loss of shareholder value (Khwaja & Mian, 2005).…”

Section: Introductionmentioning

confidence: 99%

Are institutional investors colluding with manipulators?

Luu

2023

Financ Manag Account

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This paper examines the trading behavior of institutional investors in Taiwan before, during, and after a manipulation event and determines whether institutional investors benefit from their trading behavior during the period from the year 2000 to 2020. We find that stocks with a low turnover and small market capitalization are the main targets of price manipulators. In addition, the stock price of manipulated firms increases from the start date of the manipulation event, peaks at the end of the event, then falls after the event. Foreign institutions collude with manipulators to exaggerate stock prices for self‐benefit. In contrast, securities dealers counter the trading behavior of manipulators and act as market stabilizers, causing them to suffer losses. Moreover, foreign institutions earn higher returns on stocks of manipulated firms with a low turnover during and soon after manipulation; however, they earn a higher return on stocks of manipulated firms with a high turnover in the long run after manipulation.

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“…Individuals responsible for financial misrepresentation in the US lose their jobs in 93% of cases, face criminal penalties in 28% of cases, and jail sentences that average 4.3 years (Karpoff et al, 2008b). Likewise, manipulation of stock market prices has real corporate finance consequences, including a 7% reduction in patents and 25% reduction in patent citations (Cumming, Ji, Peter, et al, 2020) and a 12% greater likelihood that mergers will be withdrawn and a 25% reduction in merger premiums (Cumming, Ji, Johan, et al, 2020). Firms guilty of misconduct have other costs beyond those already mentioned; ongoing corrective actions may also be required to manage the negative effects of earlier misconduct (Hersel et al, 2019).…”

Section: Introductionmentioning

confidence: 99%

Work‐from‐home and the risk of securities misconduct

Kanungo

Firth

Gathergood

et al. 2023

Euro Fin Management

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In the wake of the global pandemic, a challenge for CEOs and boards is to set a stakeholder‐acceptable organizational balance between remote and traditional office working. However, the risks of work‐from‐home are not yet fully understood. We describe competing theories that predict the effect on misconduct of a corporate shift to work‐from‐home. Using internal bank data on securities traders we exploit lockdown variation induced by emergency regulation of the Covid‐19 pandemic. Our difference‐in‐differences analysis reveals that working from home lowers the likelihood of securities misconduct; ultimately those working from home exhibit fewer misconduct alerts. The economic significance of these changes is large. Our study makes an important step toward understanding the link between the balance of work locations and the risk that comes with this tradeoff.

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Market manipulation and innovation

Cited by 38 publications

References 95 publications

Does Transparency Stifle or Facilitate Innovation?

Does Transparency Stifle or Facilitate Innovation?

Are institutional investors colluding with manipulators?

Work‐from‐home and the risk of securities misconduct

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