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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 Schooland CEPR
Daniela Fabbri: Cass Business School

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

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.

Keywords: short selling; ban; financial crisis; bank stability; systemic risk (search for similar items in EconPapers)
JEL-codes: G01 G12 G14 G18 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban and nep-eec
Date: 2015-12-31, Revised 2017-12-15
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http://www.csef.it/WP/wp423.pdf (application/pdf)

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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Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:423

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