Short-sale constraints and financial stability: Evidence from the Spanish market
Oscar Arce () and
Sergio Mayordomo ()
No 1410, Working Papers from Banco de España, Working Papers Homepage
We examine the effect of the short-selling ban in 2011 on Spanish stocks on the level of risk in the banking sector. Before the ban, short positions were found to be positive and significantly related to the creditworthiness of medium-sized banks, these being generally less internationally diversified and more reliant on official support. We show that the ban helped stabilise the credit risk of medium-sized banks, especially those more exposed to short-sellers’ activity, but not that of large banks and non-financial corporations. This stabilising effect came at the cost of a significantly sharp decline in liquidity, trading and price efficiency of medium-sized banks’ stocks relative to other stocks.
Keywords: short-sales constraints; financial stability; financial institutions; credit default swap; contagion (search for similar items in EconPapers)
JEL-codes: G01 G12 G14 G18 (search for similar items in EconPapers)
Pages: 30 pages
New Economics Papers: this item is included in nep-ban and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
http://www.bde.es/f/webbde/SES/Secciones/Publicaci ... /14/Fich/dt1410e.pdf First version, June 2014 (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1410
Access Statistics for this paper
More papers in Working Papers from Banco de España, Working Papers Homepage Contact information at EDIRC.
Bibliographic data for series maintained by María Beiro. Electronic Dissemination of Information Unit. Research Department. Banco de España ().