Short-selling bans and bank stability

Alessandro Beber (), Daniela Fabbri, Marco Pagano and Saverio Simonelli

No 64, ESRB Working Paper Series from European Systemic Risk Board

Abstract: In both the subprime crisis and the eurozone crisis, regulators imposed bans on short sales, aimed mainly at preventing stock price turbulence from destabilizing financial institutions. Contrary to the regulators’ intentions, financial institutions whose stocks were banned experienced greater increases in the probability of default and volatility than unbanned ones, and these increases were larger for more vulnerable financial institutions. To take into account the endogeneity of short sales bans, we match banned financial institutions with unbanned ones of similar size and riskiness, and instrument the 2011 ban decisions with regulators’ propensity to impose a ban in the 2008 crisis. JEL Classification: G01, G12, G14, G18

Keywords: ban; bank stability; financial crisis; short-selling; systemic risk (search for similar items in EconPapers)
Date: 2018-01
New Economics Papers: this item is included in nep-rmg
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Related works:
Journal Article: Short-Selling Bans and Bank Stability (2021)
Working Paper: Short-Selling Bans and Bank Stability (2020)
Working Paper: Short-Selling Bans and Bank Stability (2017)
Working Paper: Short-Selling Bans and Bank Stability (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:srk:srkwps:201864

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