Price Manipulation in Rights Offerings: Evidence from the Tehran Stock Exchange
Quarterly Journal of Securities Exchange

Quarterly Journal of Securities Exchange

Price Manipulation in Rights Offerings: Evidence from the Tehran Stock Exchange

Document Type : Original Article

Authors
Ali Ebrahimnejad 1
Mohammad Mahdi Yekke-Zare 2
1 Assistant Professor, Department of Economics, Faculty of Management and Economics, Sharif University of Technology, Tehran, Iran
2 M.Sc. Department of Economics, Faculty of Management and Economics, Sharif University of Technology, Tehran, Iran
10.22034/jse.2021.11709.1795
Abstract
Rights offering is the main equity financing method in the secondary market by listed companies in Iran . Rights are traded for a pre-determined period and subsequently, rights whose shareholders do not participate, are auctioned off by an underwriter . We find evidence of extensive price manipulation by blockholders during the rights offerings on the Tehran Stock Exchange (TSE) . Specifically , we find that blockholders on average sell between 1 - 2 percent of shares outstanding during the rights trading period, which leads to significant drop in stock and rights prices . This allows them to purchase rights from non-participating shareholders at a discount, which in turn leads to wealth transfer from non-participating shareholders, usually retail investors, to the blockholders . Our findings contribute to our understanding of the conflict between blockholders and minority shareholders and the methods of tunneling by large shareholders in markets with weak legal protection .
Keywords
Market manipulation
Rights offering
Blockholders
Tunneling
Subjects
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Quarterly Journal of Securities Exchange
Volume 18, Issue 72
Autumn 2025
Pages 173-208