Stock Market Manipulation and Corporate Venture Capital Investments

We investigate the relationship between corporate venture capital (CVC) and market manipulation for NASDAQ and NYSE listed companies. The data indicate stock market manipulation significantly drops on average over a two-year period prior to a company forming a CVC. CVC investments in entrepreneurial firms are followed by a rise in market manipulation in the ensuing year, but a decline thereafter. Stock manipulation harms the ability of CVCs to form investment syndicates and reduces the likelihood of successful IPO and acquisition exits. The hazard rate for a CVC-backed entrepreneurial firm is 0.5 for an IPO exit when the CVC faces market manipulation.