Corporate Actions and the Manipulation of Retail Investors in China

65 Pages Posted: 27 Feb 2017 Last revised: 21 Sep 2018

See all articles by Sheridan Titman

Sheridan Titman

University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)

Chishen Wei

Singapore Management University - Lee Kong Chian School of Business

Bin Zhao

New York University (NYU) - New York University (NYU), Shanghai

Date Written: September 10, 2018

Abstract

Although China is now the world’s second largest stock market, in many ways, it is still an emerging market. Relatively unsophisticated retail investors are the largest group of traders and there remain heavy restrictions on short selling. This combination increases the potential for unsavory actors to take corporate actions that artificially inflate stock prices and expropriate retail investors. By analyzing stock return and trading account records, we uncover evidence consistent with stock price manipulation around stocks splits and find that the victims are likely to be retail investors with smaller account holdings. Finally, we report a link between “suspicious” splits and off-exchange insider transactions.

Keywords: China, Retail investors, Stock splits, Manipulation

Suggested Citation

Titman, Sheridan and Wei, Chishen and Zhao, Bin, Corporate Actions and the Manipulation of Retail Investors in China (September 10, 2018). Second Annual Volatility Institute at NYU Shanghai (VINS) 2016. Available at SSRN: https://ssrn.com/abstract=2924728 or http://dx.doi.org/10.2139/ssrn.2924728

Sheridan Titman (Contact Author)

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-232-2787 (Phone)
512-471-5073 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Chishen Wei

Singapore Management University - Lee Kong Chian School of Business ( email )

50 Stamford Road
Singapore
Singapore

Bin Zhao

New York University (NYU) - New York University (NYU), Shanghai ( email )

1555 Century Ave
Shanghai, Shanghai 200122
China

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