City Research Online

Abstract

In both the subprime crisis and the eurozone crisis, regulators imposed bans on short sales mainly aimed 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. 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 with similar sizes and levels of riskiness and instrument the 2011 ban decisions with regulators’ propensity to impose a ban in the 2008 crisis.

Publication Type:	Article
Additional Information:	This is a pre-copyedited, author-produced version of an article accepted for publication in The Review of Corporate Finance Studies following peer review. The version of record Beber, A., Fabbri, D. , Pagano, M. (2021). Short-Selling Bans and Bank Stability. The Review of Corporate Finance Studies, 10(1), pp. 158-187 is available online at: https://doi.org/10.1093/rcfs/cfaa022
Subjects:	H Social Sciences > HG Finance
Departments:	Bayes Business School Bayes Business School > Finance
SWORD Depositor:	Symplectic Administrator

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