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Scammed and Scarred: Effects of Investment Fraud on Its Victims

Author

Listed:
  • Knupfer, Samuli

    (BI Norwegian Business School and IFN)

  • Rantala, Ville

    (U of Miami)

  • Vokata, Petra

    (Ohio State U)

Abstract

We study the effects of investment-fraud victimization using information on thousands of Ponzi scheme participants combined with register data on the Finnish population. A difference-in-differences analysis reveals the victims earn 5% less income after the scheme collapses. This persistent loss arises from a combination of unemployment, absenteeism, mobility, and labor force exit, and its long-run value exceeds the direct investment loss. Victims also experience higher indebtedness and more divorces and shy away from investments delegated to asset managers. These scars from fraud victimization add to the social cost of fraud and are relevant for optimal regulatory design.

Suggested Citation

  • Knupfer, Samuli & Rantala, Ville & Vokata, Petra, 2021. "Scammed and Scarred: Effects of Investment Fraud on Its Victims," Working Paper Series 2021-08, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    • Handle: RePEc:ecl:ohidic:2021-08
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    Cited by:

    1. Jacoby, Gady & Liao, Chi & Lu, Xiaomeng & Wan, Fang, 2023. "The effect of fraud experience on investment behavior," Emerging Markets Review, Elsevier, vol. 55(C).

    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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