What is ‘Manipulation’
Manipulation is the act of artificially inflating or deflating the price of a security. In most cases, manipulation is illegal. It is much easier to manipulate the share price of smaller companies, such as penny stocks, because they are not as closely watched by analysts as the medium- and large-sized firms.
Also known as “price manipulation.”
Explaining ‘Manipulation’
One way people can deflate the price of a security is by placing hundreds of small orders at a significantly lower price than the one at which it has been trading. This gives investors the impression that there is something wrong with the company, so they sell, pushing the prices even lower. Another example of manipulation would be to place simultaneous buy and sell orders through different brokers that cancel each other out but give the perception, because of the higher volume, that there is increased interest in the security.
Further Reading
- Discussion write-offs: Manipulation or impairment? – www.jstor.org [PDF]
- Market manipulation and corporate finance: A new perspective – www.jstor.org [PDF]
- The effect of the mandatory adoption of corporate governance mechanisms on earnings manipulation, management effectiveness and firm financing – www.emerald.com [PDF]
- How to define illegal price manipulation – pubs.aeaweb.org [PDF]
- The economics of earnings manipulation and managerial compensation – onlinelibrary.wiley.com [PDF]
- Manipulation and equity-based compensation – pubs.aeaweb.org [PDF]
- On the Corporate Governance, Fund Appropriation and Earning Manipulation [J] – en.cnki.com.cn [PDF]
- GOVERNMENT MANIPULATION OF CONSTITUTIONAL-LEVEL TRANSACTION COSTS: AN ECONOMIC THEORY AND ITS APPLICATION TO OFF-BUDGET … – elibrary.ru [PDF]
- Price manipulation by intermediaries – www.tandfonline.com [PDF]
- Trading-based Market Manipulation in China's Stock Market [J] – en.cnki.com.cn [PDF]
