The Decision Factors of Taiwan Stock Price Manipulation

The purpose of this study is to test what kind of market, ownership, and financial factors will increase or decrease the probability of illegal stock price manipulation. Logistic regression is employed to model the probability of stock price manipulation. The samples this study uses is the illegal manipulation cases in Taiwan, which had been accused, as manipulation samples. The benchmark sample, which never involved price manipulation and have similar market value, turnover and price-to-book ratio, were selected by Mahalonbix distance. The model was built by a loop step of stepwise logistic regression and removing independent variables which is lack of explanatory ability. Basically, the stocks with larger return volatility, higher Beta, higher turnover, higher debt ratio and lower board and foreign investor holding will have a larger probability of price manipulation.