Regulatory actions against corporate irregularities in India: analyzing the stock market impact
In this article, I use a unique dataset consisting of listed Indian firms that have been indicted for economic malpractice/default or have been non-compliant with laws/ regulations/ guidelines to estimate the stock price impact of regulatory actions against corporate irregularities. The sample consi...
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Taylor & Francis Group
2022-12-01
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| Series: | Cogent Economics & Finance |
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| Online Access: | https://www.tandfonline.com/doi/10.1080/23322039.2022.2122187 |
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| author | Prateek Jain |
| author_facet | Prateek Jain |
| author_sort | Prateek Jain |
| collection | DOAJ |
| description | In this article, I use a unique dataset consisting of listed Indian firms that have been indicted for economic malpractice/default or have been non-compliant with laws/ regulations/ guidelines to estimate the stock price impact of regulatory actions against corporate irregularities. The sample consists of regulatory charges imposed by two major Indian regulators, (i) the Ministry of Corporate Affairs (MCA) and (ii) the Securities and Exchange Board of India (SEBI). I find that regulatory actions are an effective deterrence against corporate misconduct and have a significantly negative impact on a firm’s stock price. The level of negative effect on the stock price of a firm is directly related to the severity of regulatory charges against it, i.e., cases of fraud or cheating, or payment default attract a much more negative reaction as compared to cases such as failure to disclose information, other non-compliance, etc. Finally, the results indicate that younger and less profitable firms have a higher (more negative) stock price reaction to regulatory action announcements. |
| format | Article |
| id | doaj-art-33d0d70f2a3a44baba20e492b79cb92b |
| institution | OA Journals |
| issn | 2332-2039 |
| language | English |
| publishDate | 2022-12-01 |
| publisher | Taylor & Francis Group |
| record_format | Article |
| series | Cogent Economics & Finance |
| spelling | doaj-art-33d0d70f2a3a44baba20e492b79cb92b2025-08-20T02:34:25ZengTaylor & Francis GroupCogent Economics & Finance2332-20392022-12-0110110.1080/23322039.2022.2122187Regulatory actions against corporate irregularities in India: analyzing the stock market impactPrateek Jain0Finance & Accounting Area, Indian Institute of Management Bangalore, Bengaluru, IndiaIn this article, I use a unique dataset consisting of listed Indian firms that have been indicted for economic malpractice/default or have been non-compliant with laws/ regulations/ guidelines to estimate the stock price impact of regulatory actions against corporate irregularities. The sample consists of regulatory charges imposed by two major Indian regulators, (i) the Ministry of Corporate Affairs (MCA) and (ii) the Securities and Exchange Board of India (SEBI). I find that regulatory actions are an effective deterrence against corporate misconduct and have a significantly negative impact on a firm’s stock price. The level of negative effect on the stock price of a firm is directly related to the severity of regulatory charges against it, i.e., cases of fraud or cheating, or payment default attract a much more negative reaction as compared to cases such as failure to disclose information, other non-compliance, etc. Finally, the results indicate that younger and less profitable firms have a higher (more negative) stock price reaction to regulatory action announcements.https://www.tandfonline.com/doi/10.1080/23322039.2022.2122187Corporate governancemisconductfraudpenaltyevent studyG2 |
| spellingShingle | Prateek Jain Regulatory actions against corporate irregularities in India: analyzing the stock market impact Cogent Economics & Finance Corporate governance misconduct fraud penalty event study G2 |
| title | Regulatory actions against corporate irregularities in India: analyzing the stock market impact |
| title_full | Regulatory actions against corporate irregularities in India: analyzing the stock market impact |
| title_fullStr | Regulatory actions against corporate irregularities in India: analyzing the stock market impact |
| title_full_unstemmed | Regulatory actions against corporate irregularities in India: analyzing the stock market impact |
| title_short | Regulatory actions against corporate irregularities in India: analyzing the stock market impact |
| title_sort | regulatory actions against corporate irregularities in india analyzing the stock market impact |
| topic | Corporate governance misconduct fraud penalty event study G2 |
| url | https://www.tandfonline.com/doi/10.1080/23322039.2022.2122187 |
| work_keys_str_mv | AT prateekjain regulatoryactionsagainstcorporateirregularitiesinindiaanalyzingthestockmarketimpact |