Impact of ABG Shipyard Scam on Share Price Movement of Select Indian Banks: A Testimonial from Nifty Bank

This study aims to examine and investigate the impact of the ABG Shipyard scam on banks’ performance with a focus on the constituents of the Nifty Bank index. The Market model of the event study methodology has been employed to evaluate the effect of the ABG Shipyard Scam on stock returns of the select four banks (from which ABG had taken loans and defaulted) from the NIFTY Bank index. Findings suggest that investors reacted in an adverse way due to the ABG shipyard scam. The average anomalous returns were found to be negative for the majority of the days within the event window upon a CBI case filing. A fall in cumulative stock returns of 7% was traced, which is statistically significant. Although there have been few research works conducted on banking frauds and scams, the impact of ABG Shipyard scam has never been investigated before and might had comprehensive implications across various sectors. The current study provides an insight to the academicians, corporate chiefs and shareholders regarding the effect of scams on the concerned company, banks involved and NIFTY bank sector of the stock market. This study provides a clear indication regarding the importance of governance issues for the long-term sustainability of an organisation.