Reaction of Stock Price to Frauds’ Announcements: Evidence from Indian Banking Sector

Abstract

<jats:p> This paper is an attempt to investigate the reaction of stock price of Indian banks with respect to announcements of frauds. The Event Study Methodology is used to examine the impact of frauds’ announcements to stock price of banks which experienced fraud. The fraud cases which exceed ₹1,000 crores are considered for the period from January 2014 to December 2018. The results indicate that the fraud announcements do affect the stock price of banks which experienced fraud. In majority of cases of frauds under consideration, the study found significant abnormal loss which further supported by the results of abnormal volume ratio. The highest abnormal loss is found in the stock price of Punjab National Bank (8.74 per cent) which involves the scam committed by the Nirav Modi. Due to increased frauds in the banking sector, the confidence of the investors adversely affects which may further lead to consequences on concerned banks. In this direction, the results of the study have importance for the policy makers and regulators for analysing the behaviour of stock price with respect to the announcements of frauds in the Indian banking sector. </jats:p>

Do self-esteem and ethical leadership dampens Machiavellianism–effectiveness relationship: a parallel mediation approach

“…Different banks suffered huge losses due to corporate scams. Since 2016, the Punjab National Bank suffered from fraud of 11,394 crore rupees, State Bank of India suffered fraud of a total of 10485.83 crore rupees and Indian Overseas Bank suffered from fraud of 3695.39 crore rupees (Sharma and Verma, 2020). It is well proven that lack of adequate supervision by top-level management is one of the prominent reasons for corporate fraud (Singh et al, 2016); thus, the studies on ethical leadership, the leader's effectiveness along the leader's personality aspects seem the need of the hour.…”

The impact of Sino–US trade friction on the performance of China's textile and apparel industry

“…Anderson (2009) provides a method for estimating expected returns by constructing a friction model in an event study. Sharma and Verma (2020) investigate the impacts of announcements of fraud on the stock price reactions of Indian banks.…”

Event Study: Advanced Machine Learning and Statistical Technique for Analyzing Sustainability in Banking Stocks

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