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Short-Selling Bans and Bank Stability

Alessandro Beber, Daniela Fabbri, Marco Pagano () and Saverio Simonelli
Additional contact information
Alessandro Beber: Cass Business School and CEPR
Daniela Fabbri: Cass Business School

No 1604, EIEF Working Papers Series from Einaudi Institute for Economics and Finance (EIEF)

Abstract: In both the subprime crisis and the euro-area 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.

New Economics Papers: this item is included in nep-fmk
Date: 2016, Revised 2017-12
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Related works:
Working Paper: Short-selling bans and bank stability (2018) Downloads
Working Paper: Short-Selling Bans and Bank Stability (2017) Downloads
Working Paper: Short-Selling Bans and Bank Stability (2016) Downloads
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