“Pump-and-Dump” through Media Tone? Institutional Trading Strategies during Corporate Litigation

74 Pages Posted: 21 May 2020 Last revised: 10 Dec 2021

See all articles by Jie He

Jie He

University of Georgia - Department of Finance

Han Xia

University of Texas at Dallas - Naveen Jindal School of Management

Yabo Zhao

University of Texas at Dallas, Naveen Jindal School of Management, Department of Finance

Date Written: December 6, 2021

Abstract

Institutional investors often own equity blocks of media companies besides industrial firms. When these industrial firms become defendants of corporate litigation, institutions nudge media companies they simultaneously blockhold to provide more lenient coverage of the defendants. Doing so temporarily props up investor sentiment, mitigates negative price impact, and allows institutions extra time to exit positions in troubled defendants – a pseudo “pump-and-dump” strategy. Dumped shares by institutions are largely absorbed by retail investors. Media boost sentiment by either playing down legal ramifications in question or playing up other positive matters. The strategy is especially prominent among activists, and likely involves institutions’ deliberate and active participation. Ex ante, institutions appear to hold media companies to “save for a rainy day.”

Keywords: “pump-and-dump”, media tone, investor sentiment, corporate litigation, institutional trading strategies

Suggested Citation

He, Jie and Xia, Han and Zhao, Yabo, “Pump-and-Dump” through Media Tone? Institutional Trading Strategies during Corporate Litigation (December 6, 2021). Available at SSRN: https://ssrn.com/abstract=3584740 or http://dx.doi.org/10.2139/ssrn.3584740

Jie He

University of Georgia - Department of Finance ( email )

B318 Amos Hall
Terry College of Business, University of Georgia
Athens, GA 30602-6253
United States

Han Xia (Contact Author)

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

Yabo Zhao

University of Texas at Dallas, Naveen Jindal School of Management, Department of Finance ( email )

800 West Campbell
Richarson, TX 75080
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
413
Abstract Views
1,998
rank
100,403
PlumX Metrics