Abstract
This study is the first attempt to empirically analyse stock market manipulation on the Nigerian Stock Exchange and its consequences on economic performance. The empirical investigation employs a broad data set of 186 actual manipulation cases indicted by the Nigerian Security and Exchange Commission between 2002 and 2016. We embrace market microstructure analysis and the event study method to understand how various manipulation techniques impact on market measures, and the Error Correction Model to evaluate their economic effects. Manipulation is found to distort market efficiency measures (such as market capitalization, value traded ratio and All-Share Index) and genuine traders are forced to exit the market to avoid possible trading with a manipulator. Such huge divestment and the subsequent financial risk weaken the ability of the Stock Exchange market to improve economic performance, creating negative consequences at the post-manipulation period. Essentially, economic variables (such as the GDP) react negatively to manipulative trading. This finding is insightful and a prompt to the Securities and Exchange Commission to design policy responses towards deterring and prosecuting unfair trading practices or other activities that contravene the market rules.
Highlights
A typical stock market is characterized by the trading of equity securities such as shares which represent ownership in a particular corporation (Cheng and Gul 2010)
3.4 The Nigerian stock market and economic growth This study examines the quantitative impact of the Nigerian stock market efficiency on economic growth using Error Correction Model between 2002 and 2016
5 Conclusion This study empirically investigates the impact of stock market manipulation on Nigerian economic performance, and to examine the reactions of market efficiency measures to manipulative trading
Summary
A typical stock market is characterized by the trading of equity securities such as shares which represent ownership in a particular corporation (Cheng and Gul 2010). Frank and Goyal (2007) argued that the present performance of a company or an expectation of good performance has a direct impact on the share price. It is a common claim among researchers that the economic climate of corporations is one huge factor that causes fluctuations in investors’ sentiment and induces share price behaviour. When stock exchanges make decent trading facilities available to market participants, it facilitates smooth trading of listed equity securities (Gao and Kling 2006). A well-developed stock exchange increases savings by ensuring the availability of diverse
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