Do firms leverage sock puppets in online stock forums? Evidence from China’s M&A transactions

Jingyi Guan, Yunhui Wen and Eping Liu

International Journal of Managerial Finance, 2025, vol. 21, issue 4, 989-1037

Abstract: PurposeThis study aims to investigate whether firms leverage sock puppets in online stock forums to manipulate stock prices during merger and acquisition (M&A) transactions.Design/methodology/approachThis study uses a sample of Chinese A-share listed companies from 2010 to 2022, resulting in a final dataset of 9,378 observations. The data on posts in online stock forums is obtained from relevant databases.FindingsThis study finds that positive posts significantly increase before or during M&A announcements, influenced by M&A size. Higher stock payment, more undervalued pre-M&A stock prices or lower positive M&A announcement sentiment leads to more positive posts. Additionally, proximity to the announcement period, larger M&A size or higher premiums results in more pronounced sock puppet hype. However, more positive posts and larger M&A sizes trigger stricter regulatory inquiries. Furthermore, sock puppet hype behavior is influenced by the target firm’s characteristics and the M&A transaction. Sock puppet hype decreases with more external supervision or weaker internal principal–agent problems.Originality/valueThis study reveals the relationship between firms’ M&A transactions and their use of sock puppets to manipulate stock prices, contributing to the literature on M&A and social media collusion. It also provides insights for regulators and investors to identify social media hype and assess M&A risks.

Keywords: Merger and acquisition (M&A); Social media; Online stock forums; Sock puppets; Stock price (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijmfpp:ijmf-11-2024-0610

DOI: 10.1108/IJMF-11-2024-0610

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