Worldwide reach of short selling regulations

Archana Jain, Pankaj Jain, Thomas McInish () and Michael McKenzie

Journal of Financial Economics, 2013, vol. 109, issue 1, 177-197

Abstract: We characterize legality and incidence of short selling in a worldwide, multimarket framework. Home country short selling restrictions curtail home market stock borrowing by 45% and reduce short selling of the country's American Depository Receipts (ADRs) by 68% due to regulatory reach. Also, the 2008 US ban on short selling of financial firms reduced borrowing in foreign locations. These findings are robust to controls for option availability, enforcement, returns, firm size, trading volume, dividends, ADR level, volatility, days-to-cover, and industry sector. Further, we show that investor conduct resulting from adherence to professional standards is a more powerful mechanism of regulatory reach than intergovernment cooperation.

Keywords: Short selling; ADRs; Regulatory reach; Regulatory arbitrage; Enforcement (search for similar items in EconPapers)
JEL-codes: G15 G18 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (43)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:109:y:2013:i:1:p:177-197

DOI: 10.1016/j.jfineco.2013.02.012

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