The Impact of Fraudulent False Information on Equity Values

Saif Ullah (), Nadia Massoud () and Barry Scholnick ()

Journal of Business Ethics, 2014, vol. 120, issue 2, 219-235

Abstract: There are two types of stock price manipulation examined in the theoretical literature: (1) insider trading, which involves private information that is true and (2) the public spreading of fraudulent false information. While there is a large empirical literature on insider trading, this is the first empirical article to examine the impact of false, fraudulent public information on stock prices and trading volume. We find that such false information, even after being denied by a credible source such as the SEC, generates both abnormal returns and abnormal trading volume. We also find that the effects of the false information on security returns and volume can be persistent for at least 2 weeks. In addition, we show that perpetrators of false news attacks can make potentially large profits from such market manipulations. Copyright Springer Science+Business Media Dordrecht 2014

Keywords: False news; Credible denial; Market manipulation; Price reversal; Abnormal returns and abnormal trading volume; Event study; Front-running (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:jbuset:v:120:y:2014:i:2:p:219-235

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DOI: 10.1007/s10551-013-1657-7

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