Market manipulation and innovation

Abstract

End-of-day stock price manipulation is generally associated with short-termism, long-term damage to equity values, and reduced incentives for employees to innovate. We use a sample of suspected stock price manipulation events based on intraday data for stocks from nine countries over eight years, and find evidence of negative effects of market manipulation on real investment decisions in innovation. We show that these negative effects are particularly harmful to innovation in markets with low intellectual property rights and high shareholder protection.