Corporate actions and the manipulation of retail investors in China: An analysis of stock splits

Author

Sheridan TITMAN
Chi Shen WEI, Singapore Management UniversityFollow
Bin ZHAO

Publication Type

Journal Article

Version

publishedVersion

Publication Date

9-2022

Abstract

We identify a group of “suspicious” firms that use stock splits, perhaps along with other activities, to artificially inflate their share prices. Following the initiation of suspicious splits, share prices temporarily increase, and subsequently decline below their presplit levels. Using account level data from the Shanghai Stock Exchange, we find that small retail investors acquire shares in firms initiating suspicious splits, while more sophisticated investors accumulate positions before suspicious split announcements and sell in the postsplit period. We also find that insiders sell large blocks of shares and obtain loans using company stock as collateral around the initiation of suspicious splits.

Keywords

Stock market manipulation, stock splits, China

Discipline

Finance and Financial Management

Research Areas

Finance

Publication

Journal of Financial Economics

Volume

145

Issue

3

First Page

762

Last Page

787

ISSN

0304-405X

Identifier

10.1016/j.jfineco.2021.09.018

Publisher

Elsevier

Citation

TITMAN, Sheridan; WEI, Chi Shen; and ZHAO, Bin. Corporate actions and the manipulation of retail investors in China: An analysis of stock splits. (2022). Journal of Financial Economics. 145, (3), 762-787.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/7076

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.

Comments

Forthcoming

Additional URL

https://doi.org/10.1016/j.jfineco.2021.09.018