Stock price manipulation through trading restrictions leads to inflated event returns.
Firms in Japan can boost their stock prices by limiting how much investors can sell. By looking at real events, it was found that when companies restrict trading, their stock prices can go up by more than 30%. But once the restrictions are lifted, prices tend to drop back down. During these restricted periods, companies are more likely to issue new shares or pay off debts, showing they have strong reasons to manipulate their stock prices.