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Large Trade Based Manipulation: Beyond the Prosecuted Cases

Journal of Corporate Finance, Vol. 42, 2017

Posted: 9 Nov 2017

See all articles by Suman Neupane

Suman Neupane

Griffith University - Department of Accounting, Finance and Economics

S. Ghon Rhee

University of Hawaii at Manoa - Shidler College of Business; University of Hawaii at Manoa - Department of Financial Economics and Institutions

Kulunu Vithanage

Griffith University- Department of Accounting, Finance and Economics

Madhu Veeraraghavan

T.A. PAI Management Institute, Finance Area

Date Written: November 7, 2017

Abstract

Using insights from prosecuted cases, we present compelling evidence of large-trade based manipulation in a sizeable number of Indian IPOs that, in all likelihood escaped enforcement actions. Consistent with the pump-and-dump scheme these IPOs exhibit abnormally high volume of large trades, a significant fraction of which originates from a syndicate of traders present in the prosecuted IPOs. More importantly, stock price in the manipulated IPOs rises initially on account of artificial trades, but then declines significantly as the manipulators exit the market. Interestingly, not all attempts at manipulation are entirely successful as stock price in some of the manipulated IPOs crash on the first day of listing.

Keywords: Manipulation, Trade-based manipulation, Pump-and-dump scheme, Indian IPOs

JEL Classification: G15, G24, G28

Suggested Citation

Neupane, Suman and Rhee, S. Ghon and Vithanage, Kulunu and Veeraraghavan, Madhu, Large Trade Based Manipulation: Beyond the Prosecuted Cases (November 7, 2017). Journal of Corporate Finance, Vol. 42, 2017, Available at SSRN: https://ssrn.com/abstract=3066656

Suman Neupane (Contact Author)

Griffith University - Department of Accounting, Finance and Economics ( email )

170 Kessels Road
Nathan, Queensland 4111
Australia

S. Ghon Rhee

University of Hawaii at Manoa - Shidler College of Business ( email )

2404 Maile Way
C-304, FEI/CBA
Honolulu, HI 96822
United States

University of Hawaii at Manoa - Department of Financial Economics and Institutions ( email )

United States

Kulunu Vithanage

Griffith University- Department of Accounting, Finance and Economics ( email )

170 Kessels Rd
Nathan, QLD 4111
Australia
61405993184 (Phone)
61405993184 (Fax)

Madhu Veeraraghavan

T.A. PAI Management Institute, Finance Area ( email )

Bangalore
Manipal, Karnataka 576104
India
+91-820-2701030 (Phone)

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