![]() ![]() In many regards, stock splits provide an ideal corporate vehicle for manipulation. In this paper, we focus on how corporate insiders use stock splits, in combination with other activities, to artificially inflate their share price. These short-selling restrictions prevent arbitrageurs from stepping in to counteract manipulative actions. Short selling was banned prior to 20 restrictions prohibited the short selling of nearly 70% of stocks. ![]() Second, short selling in the Chinese A-share market is substantially limited. 2 Small retail investors tend to be relatively unsophisticated: approximately one third of all Chinese retail investors lack a high school education and a 2014 survey reports that the majority of new account openings were by investors who did not have a high school degree (Gan et al., 2015). ![]() First, retail investors dominate trading and account for nearly 90% of daily trading volume on the Shanghai Stock Exchange (SSE). Two factors make the Chinese market particularly susceptible to such behavior. This paper examines whether Chinese firms are able to manipulate their share prices by taking misleading corporate actions. As developing economies globalized in the late twenty-first century, price manipulation was a common occurrence in many emerging financial markets (e.g., Khanna and Sunder, 1999 Khwaja and Mian, 2005). 1 Yet, such lessons appear to be hard to learn and are easily forgotten. From the bear raids in the Amsterdam stock market in the seventeenth century, to the market corners and trading pools on Wall Street in the nineteenth and early twentieth centuries, regulators have fought to stay ahead of manipulators and struggled to restore stability and trust to financial markets. While its growth has been impressive, young burgeoning stock markets have been vulnerable to episodes of price manipulation. By 2015, it was the second largest in the world by market capitalization. Under the guidance of academics and industry practitioners, China's stock market was launched in December 1990. ![]()
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