Market Manipulation and ESG Incidents

46 Pages Posted: 10 May 2023

See all articles by Douglas J. Cumming

Douglas J. Cumming

Florida Atlantic University; European Corporate Governance Institute (ECGI)

Shan Ji

Capital Markets CRC

Monika Tarsalewska

University of Exeter Business School

Date Written: April 26, 2023

Abstract

Market manipulation are deliberate actions that affect trading activity and corporate policies. We conjecture that market manipulation has unintended consequences also for the ESG policies of the firm. Based on an international sample of monthly data from 2007 to 2018, the data indicate that the presence of market manipulation in a stock increases the probability of ESG incidents by the firm in the ensuing year by more than 1%. We present evidence that this effect is driven by the three channels: financial frictions, business risk, and employment changes. The findings are robust to numerous checks and different fixed effects structure. We also mitigate the endogeneity concerns by using a quasi-natural experiments that improved transparency in difference-in-difference research design.

Keywords: ESG, market manipulation, MiFID, mandatory ESG disclosure, short-terminism

JEL Classification: G14, G15, Q50

Suggested Citation

Cumming, Douglas J. and Ji, Shan and Tarsalewska, Monika, Market Manipulation and ESG Incidents (April 26, 2023). Available at SSRN: https://ssrn.com/abstract=4430217 or http://dx.doi.org/10.2139/ssrn.4430217

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)

Monika Tarsalewska (Contact Author)

University of Exeter Business School ( email )

Streatham Court, Streatham Campus,
Rennes Drive
Exeter, Devon EX4 4PU
United Kingdom

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