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Which firms are more prone to stock market manipulation?

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Author Info

  • Imisiker, Serkan
  • Tas, Bedri Kamil Onur

Abstract

This study empirically investigates which firms are more susceptible to successful manipulation. For this purpose, a unique data set consisting of manipulation cases from 1998 to 2006 from the Istanbul Stock Exchange (ISE) was collected and firm-specific variables are used to explain these manipulations. Probit regression results show that small firms, firms with less free float rate and a higher leverage ratio are more prone to stock price manipulation. Dynamic probit analysis concludes that the probability of manipulation of a stock is significantly higher for stocks that have been previously manipulated.

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File URL: http://www.sciencedirect.com/science/article/pii/S1566014113000356
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Bibliographic Info

Article provided by Elsevier in its journal Emerging Markets Review.

Volume (Year): 16 (2013)
Issue (Month): C ()
Pages: 119-130

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Handle: RePEc:eee:ememar:v:16:y:2013:i:c:p:119-130

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Web page: http://www.elsevier.com/locate/inca/620356

Related research

Keywords: Manipulation; Firm characteristics; Dynamic probit regression;

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References

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  1. Arulampalam, Wiji & Stewart, Mark B., 2008. "Simplified Implementation of the Heckman Estimator of the Dynamic Probit Model and a Comparison with Alternative Estimators," The Warwick Economics Research Paper Series (TWERPS) 884, University of Warwick, Department of Economics.
  2. Jeffrey M. Wooldridge, 2005. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(1), pages 39-54.
  3. Allen, Franklin & Gale, Douglas, 1992. "Stock-Price Manipulation," Review of Financial Studies, Society for Financial Studies, vol. 5(3), pages 503-29.
  4. Itay Goldstein & Alexander Guembel, 2008. "Manipulation and the Allocational Role of Prices," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 133-164.
  5. Rajesh K. Aggarwal & Guojun Wu, 2006. "Stock Market Manipulations," The Journal of Business, University of Chicago Press, vol. 79(4), pages 1915-1954, July.
  6. Merrick, John Jr & Naik, Narayan Y. & Yadav, Pradeep K., 2005. "Strategic trading behavior and price distortion in a manipulated market: anatomy of a squeeze," Journal of Financial Economics, Elsevier, vol. 77(1), pages 171-218, July.
  7. Franklin Allen & Lubomir Litov & Jianping Mei, 2006. "Large Investors, Price Manipulation, and Limits to Arbitrage: An Anatomy of Market Corners," Review of Finance, European Finance Association, vol. 10(4), pages 645-693, December.
  8. Mark Stewart, 2006. "Maximum simulated likelihood estimation of random-effects dynamic probit models with autocorrelated errors," Stata Journal, StataCorp LP, vol. 6(2), pages 256-272, June.
  9. Jiang, Guolin & Mahoney, Paul G. & Mei, Jianping, 2005. "Market manipulation: A comprehensive study of stock pools," Journal of Financial Economics, Elsevier, vol. 77(1), pages 147-170, July.
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