Market Manipulation and Corporate Culture

51 Pages Posted: 20 Apr 2022 Last revised: 28 Jun 2023

See all articles by Maimuna Akter, PhD

Maimuna Akter, PhD

Gonzaga University - School of Business Administration

Douglas J. Cumming

Florida Atlantic University; European Corporate Governance Institute (ECGI)

Shan Ji

Capital Markets CRC

Vincenzo Verdoliva

University of Naples "Parthenope"

Date Written: April 10, 2022

Abstract

We propose that market manipulation, which brings about managerial short-termism, shareholder awareness and changes in risk preferences, and an opaque environment, has a negative causal impact on the four dimensions of corporate culture: create, compete, and control orientations of the corporate culture. We test this proposition by matching corporate culture dimensions from textual analysis of 10-K reports to suspected cases of market manipulation using NASD surveillance software for all US publicly traded firms. The data indicate market manipulation consistently negatively affects the corporate culture dimensions in subsequent years, and this effect is not temporary. We propose shareholder activism and reduced corporate risk-taking to be the potential channels of the relationship. However, the presence of common ownership moderates the impact of market manipulation on corporate culture by improving corporate governance and reducing information costs. The results are robust using different identification strategies, alternative model specifications, and adjustments for potential endogeneity.

Keywords: Market Manipulation, Misconduct, Corporate Culture

JEL Classification: G14, G34, M14

Suggested Citation

Akter, Maimuna and Cumming, Douglas J. and Ji, Shan and Verdoliva, Vincenzo, Market Manipulation and Corporate Culture (April 10, 2022). Available at SSRN: https://ssrn.com/abstract=4080428 or http://dx.doi.org/10.2139/ssrn.4080428

Maimuna Akter (Contact Author)

Gonzaga University - School of Business Administration ( email )

Spokane, WA
United States

Douglas J. Cumming

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://sites.google.com/view/douglascumming/bio?authuser=0

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://https://ecgi.global/users/douglas-cumming

Shan Ji

Capital Markets CRC ( email )

GPO Box 970
55 Harrington Street
Sydney, NSW 2001
Australia
+61280884237 (Phone)

Vincenzo Verdoliva

University of Naples "Parthenope" ( email )

Via generale parisi
Naples, Naples 80133
Italy

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