Opening price manipulation and its value influences |
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| Institution: | 1. School of Economics and Management, Fujian Agriculture and Forestry University, Fuzhou, China;2. Guanghua School of Management, Peking University Beijing, China;3. Business School, University of Portsmouth, PO1 3DE, England, United Kingdom;1. Department of Mathematics and School of Economics and Management, University of Bologna, Bologna, Italy;2. Department of Economics, Society and Politics, University of Urbino Carlo Bo, Italy;3. Department of Economics, University of Bamberg, Germany;1. School of Finance, Renmin University of China, Beijing 100872, China;2. School of Management and Engineering, Nanjing University, Institute of Financial Innovation, Nanjing 210093, China;1. School of Business, Central South University, Changsha, Hunan 410083, China;2. School of Finance, Shanghai Lixin University of Accounting and Finance, Shanghai 201209, China;1. Department of Accountancy and Finance at University of Antwerp, Stadscampus Prinsstraat 13 S.B.329, 2000 Antwerpen, Belgium;2. College of Business, University of Akron, Akron, OH, USA;3. School of Accounting and Finance, University of Vaasa, Wolffintie 34, 65200 Vaasa, Finland;4. Department of Data Science, Economics and Finance at EDHEC Business School, 24 avenue Gustave Delory, 59057 Roubaix Cedex 1, France;1. Faculty of Business, City University of Macau, Macau, China;2. School of Business, Macau University of Science and Technology, Macau, China;1. College of Economics and Management, Nanjing University of Aeronautics and Astronautics, China;2. Business School and International Research Centre for Sustainable Finance, Ningbo University, China;3. School of Economics, University of Nottingham Ningbo, China;4. Chinese Academy of Finance and Development, Central University of Finance and Economics, China |
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| Abstract: | We investigate how opening price manipulation influences market behaviors and investors' returns. Analyzing direct evidence comprising 87 opening price manipulation cases, and indirect evidence consisting of 19,003 suspected cases detected by an opening price manipulation identification model that we construct, we examine the impact of manipulation on mispricing, investors' welfare, trading activity and price volatility. Our results indicate that manipulated stocks experience significantly lower returns and a higher probability of price reversal after manipulation. Investors who purchase manipulated stocks at their opening price, or the volume-weighted average price, on the manipulation day make losses on their investments. Further, manipulation increases market trading activity and price volatility due to the influx of retail investors. Our additional analysis demonstrates that enhancing the intensity of external supervision and internal governance can mitigate mispricing caused by opening price manipulation. Our study provides novel evidence of the economic consequences of open market manipulation and policy implications for governments and regulators to develop effective supervisory processes to reduce manipulation and mitigate its impact on efficient markets. |
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