Financial Risk Management
The Impact of Financial Scams on Investor Behavior

Article Details
Pub. Date : Mar, 2021
Product Name : The IUP Journal of Financial Risk Management
Product Type : Article
Product Code : IJFRM30321
Author Name : Anjana Buddaraju* and P Riya Devaiah**
Availability : YES
Subject/Domain : Finance Management
Download Format : PDF Format
No. of Pages : 17

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Abstract

Financial scams have become common in India. Indian stock markets have been witnessing the occurrences of financial scams and investors losing out money due to the scam's impact. This bad investment experience of financial fraud in the stock market creates a negative notion amongst investors and discourages them from investing in stock markets. This research paper tries to understand, interpret, and explore the investors' reactions towards financial scams of the companies in which they have invested and how those past experiences of monetary loss in financial scams have affected their future investment choices. A systematic review of existing literature was conducted to make an in-depth analysis of the mind space of investors who have lost their savings and investments and to understand their mindset post the financial scams. The analysis subsequently helped acknowledge that the investors have reacted to the financial scams. The reactions have negatively impacted the percentage of money invested in shares and stock markets, which is in turn affecting the stock market capitalization.


Introduction

In the modern world, people have become more conscious about how they want to save and how they want to invest their money. Retail investors invest their money in various avenues, which can bring them higher returns on the capital invested. Their main motive is to grow their money. Investments play a crucial role in increasing the wealth and prosperity of the investors. It gives a sense of confidence that the money invested will yield higher returns. It might be not only the retail investors but also the institutional investors. It can be said that money that is not supported is money wasted. Money has to be invested in making more money. When it is kept idle, it only causes a loss of opportunity to grow. Every individual from the low-income groups to the high-income groups wants to increase their wealth and prosper. Investors are very cautious and want higher returns on any investment made with limited risk. Some are very particular about returns irrespective of the risks involved, while others are more concerned about the chance even though they might get lower returns. According


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ISBN: 978-81-314-2793-4
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