Victimisation of investors from fraudulent investment schemes and their protection through financial education

Kamakhya Narain Singh and Gaurav Misra

Journal of Financial Crime, 2022, vol. 30, issue 5, 1305-1322

Abstract: Purpose - The purpose of this study is to identify the significant demographic and socio-economic characteristics of individuals who are likely to invest in a fraudulent investment scheme. It also quantifies the extent to which financial literacy helps in reducing the odds of investments in such schemes. Based on these findings, it provides policy recommendations to regulators and governments. Design/methodology/approach - This study uses nationally representative data from the “India Assessment of Financial Capability 2018” survey. It further uses logistic regression with a binary outcome variable to assess the individual-level odds of investments in fraudulent investment schemes. Findings - This study concludes that males between 40 and 59 years of age, who are well-educated (are at least graduates), score low in financial literacy, belong to the middle-income group, and SEC A3 households are most vulnerable to victimization by financial fraudulent investment schemes. It finds that financial literacy significantly reduces the odds of investment into fraudulent schemes to the extent of 39.118%. Originality/value - This study quantifies the extent to which financial literacy helps in reducing the odds of individual investments in a fraudulent investment scheme. As financial literacy has a significant and negative relationship with the likelihood of investment in such schemes, this study provides policy interventions and recommendations to regulators and governments to safeguard the interest of individual investors.

Keywords: Ponzi schemes; Investment fraud; Financial literacy; Policy recommendation; High yielding investment plans; Financial education; Financial crime (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfcpps:jfc-07-2022-0167

DOI: 10.1108/JFC-07-2022-0167

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