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Stock Market Participation in the Aftermath of an Accounting Scandal

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  • Sane, Renuka

    (National Institute of Public Finance and Policy)

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. 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

  • Sane, Renuka, 2017. "Stock Market Participation in the Aftermath of an Accounting Scandal," Working Papers 17/198, National Institute of Public Finance and Policy.
    • Handle: RePEc:npf:wpaper:17/198
    Note: Working Paper 198, 2017
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    References listed on IDEAS

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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.

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