Short-Selling Bans Around the World: Evidence from the 2007-09 Crisis

64 Pages Posted: 10 Nov 2009 Last revised: 22 Aug 2011

Alessandro Beber

Cass Business School; Centre for Economic Policy Research (CEPR)

Marco Pagano

University of Naples Federico II - Department of Economics and Statistics; Centre for Studies in Economics and Finance (CSEF); Einaudi Institute for Economics and Finance (EIEF); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

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Date Written: August 19, 2011

Abstract

Most regulators around the world reacted to the 2007-09 crisis by imposing bans or constraints on short-selling. These were imposed and lifted at different dates in different countries, often applied to different sets of stocks and featured varying degrees of stringency. We exploit this variation in short-sales regimes to identify their effects on liquidity, price discovery and stock prices. Using panel and matching techniques, we find that bans (i) were detrimental for liquidity, especially for stocks with small capitalization and no listed options; (ii) slowed down price discovery, especially in bear markets, and (iii) failed to support prices, except possibly for U.S. financial stocks.

Suggested Citation

Beber, Alessandro and Pagano, Marco, Short-Selling Bans Around the World: Evidence from the 2007-09 Crisis (August 19, 2011). Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1502184

Alessandro Beber (Contact Author)

Cass Business School ( email )

London, EC2Y 8HB
Great Britain

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Marco Pagano

University of Naples Federico II - Department of Economics and Statistics ( email )

Via Cintia - Monte S. Angelo
Napoli, 80126
Italy
+39 081 675306 (Phone)
+39 081 7663540 (Fax)

Centre for Studies in Economics and Finance (CSEF) ( email )

Via Cintia
Complesso Monte S. Angelo
Naples, Naples 80126
Italy

Einaudi Institute for Economics and Finance (EIEF)

Via Sallustiana, 62
Rome, 00187
Italy

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http:/www.ecgi.org

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