Do internet water armies facilitate managerial opportunistic stock selling? –evidence from China

In recent years, the rapid growth of online financial forums and paid posting activities has raised increasing concerns about public opinion manipulation in capital markets and its potential consequences for corporate behavior. Against this backdrop, using a sample of Chinese Shanghai and Shenzhen A-share listed companies from 2006 to 2023, this paper is the first to systematically examine the impact of internet water armies on managerial opportunistic stock selling. The results show that the more severe the intervention of internet water armies a firm faces, the greater both the amount and frequency of opportunistic stock selling by executives. Mechanism tests reveal that water armies influence managerial behavior through two main channels: first, by exacerbating information asymmetry and second, by disrupting investor sentiment, thereby creating opportunities for executives to cash out based on their information advantage. Heterogeneity analysis indicates that the negative effects of internet water armies are more pronounced in firms operating in highly competitive industries, with higher media attention, and with lower analyst coverage. This study provides new empirical evidence for research on public opinion manipulation and insider behavior in capital markets, and offers policy implications for regulators seeking to identify and curb the activities of internet water armies.