Does it help firms to secretly pay for stock promoters?

Nadia Massoud, Saif Ullah and Barry Scholnick

Journal of Financial Stability, 2016, vol. 26, issue C, 45-61

Abstract: We examine deals between listed firms and promoters who have been secretly hired to increase their stock prices. This behavior by the secret promoter is illegal (and leads to prosecution) but the actions of the hiring firm are legal. We use data from these prosecutions to analyze the behavior and motivations of the hiring firms. We find that secret promotion leads to an initial increase in the price and trading volume of the firms on the date that the secret promotion started. Subsequently, however, we find that this increase in price is reversed when regulators (e.g. SEC or NASD) take action against these promoters for not disclosing their relationships with the hiring firms. We find that the main motives behind these relationships are to maximize the private benefits of the firm’s managers and owners through pumping the share prices and subsequently dumping their shareholdings.

Keywords: Promoters; Paid analysis; Pump and dump (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1572308916300870
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:26:y:2016:i:c:p:45-61

DOI: 10.1016/j.jfs.2016.08.002

Access Statistics for this article

Journal of Financial Stability is currently edited by I. Hasan, W. C. Hunter and G. G. Kaufman

More articles in Journal of Financial Stability from Elsevier
Bibliographic data for series maintained by Catherine Liu ().