Dimapur, Oct 22 (NPN): Researchers from Nagaland University and Pandit Deendayal Upadhyaya Adarsha Mahavidyalaya, Tulungia, Assam, have found that major banking fraud disclosures trigger sharp negative reactions in the stock market, with public sector banks experiencing steeper losses than private banks.
The study highlights how ownership structure, institutional credibility, and a bank’s size and maturity influence investor confidence following financial misconduct. The researchers examined the impact of major banking fraud announcements on the share prices of affected banks and their spillover effects on other financial institutions. The findings underline the importance of trust and transparency in the banking sector, which plays a crucial role in economic growth, mobilising savings and financing businesses and individuals.
Despite regulatory reforms and oversight mechanisms, financial fraud continues to threaten shareholder wealth and confidence in the wider financial system.
The study was co-authored by Prof. Joy Das of Nagaland University and Dr. Mahesh Dahal of Pandit Deendayal Upadhyaya Adarsha Mahavidyalaya, Tulungia. It was published in the peer-reviewed, open-access BRICS Journal of Economics, published by Lomonosov Moscow State University.
Prof. Jagadish Kumar Patnaik, Vice-Chancellor, Nagaland University, said,“This research is a significant contribution to understanding the impact of banking fraud on financial markets. By examining four major Indian banking fraud cases, the study highlights how ownership structure, institutional credibility and bank size influence stock market reactions. Such evidence-based research strengthens academic inquiry, promotes greater financial accountability and reinforces the importance of transparency and sound governance in the banking sector. I congratulate Prof. Joy Das and the researchers from Nagaland University and Pandit Deendayal Upadhyaya Adarsha Mahavidyalaya, Tulungia, for this valuable contribution to contemporary financial research.” The study examined four major fraud cases involving IDBI Bank, Punjab National Bank, Bank of India and Canara Bank, using Bombay Stock Exchange data, event study methodology and regression analysis to assess abnormal share price movements.
Prof. Joy Das of Nagaland University’s Department of Commerce said the affected banks experienced significant negative abnormal returns, while private sector banks generally faced delayed or less pronounced market reactions.
He said ownership structure influenced investor perceptions of banking fraud.
Dr. Mahesh Dahal, assistant professor at Pandit Deendayal Upadhyaya Adarsha Mahavidyalaya, said the findings also revealed spillover effects, with fraud announcements affecting the share prices of banks not directly involved. The impact varied according to ownership structure and the timing of disclosures.
The study further found that larger and more established banks demonstrated greater resilience to fraud-related market penalties, suggesting that institutional reputation and experience help cushion adverse reactions.
The researchers said the findings highlight the need for stronger corporate governance, effective risk management and credible safeguards to protect investor confidence and strengthen India’s banking system. The study also offers insights for regulators, investors and financial professionals assessing fraud-related risks.
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