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Stock market participation in the aftermath of an accounting scandal

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  • Renuka Sane

    (National Institute of Public Finance and Policy
    Institute of Economic Growth)

Abstract

In this paper we study the impact on investor behaviour of fraud revelation. We ask if investors with direct exposure to stock market fraud (treated investors) are more likely to decrease their participation in the stock market than investors with no direct exposure to fraud (control investors)? Using daily investor account holdings data from the National Stock Depository Limited (NSDL), the largest depository in India, we find that treated investors cash out almost 10.6 percentage points of their overall portfolio relative to control investors post the crisis. The cashing out is largely restricted to the bad stock's. Over the period of a month,there is no difference in the trading behaviour of the treated and control investors. These results are contrary to those found in mature economies.

Suggested Citation

  • Renuka Sane, 2017. "Stock market participation in the aftermath of an accounting scandal," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2017-006, Indira Gandhi Institute of Development Research, Mumbai, India.
    • Handle: RePEc:ind:igiwpp:2017-006
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    File URL: http://www.igidr.ac.in/pdf/publication/WP-2017-006.pdf
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    Cited by:

    1. Tandon, Suranjali & Rao, R. Kavita, 2017. "Trade Misinvoicing: What can we Measure?," Working Papers 17/200, National Institute of Public Finance and Policy.

    More about this item

    Keywords

    corporate fraud; household stock market participation; India;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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