Monitor or manipulator? The effect of institutional ownership on market manipulation

Jie Liu, Chonglin Wu, Wanqing Zheng and Gengyan Lin

Finance Research Letters, 2023, vol. 58, issue PB

Abstract: Employing a sample of suspected stock manipulation cases based on intraday data, we find that higher institutional ownership is associated with a lower frequency of market manipulation, supporting the monitoring effect of institutional investors. This effect persists even when we instrument index reconstitutions as an exogenous determinant of institutional ownership. Further, our findings indicate that this effect is driven by reduced information asymmetries resulting from the oversight of institutional investors. Moreover, the empirical evidence suggests that the monitoring effects are more pronounced for long-term institutional investors and concentrated institutional investors.

Keywords: Institutional investor; Market manipulation; Information asymmetry; Monitoring effect (search for similar items in EconPapers)
JEL-codes: G12 G14 G18 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pb:s1544612323008437

DOI: 10.1016/j.frl.2023.104471

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