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Are short-sales constraints binding when there is a centralized lendable securities market? Evidence from Japan

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  • Khan, Mostafa Saidur Rahim
  • Bremer, Marc
  • Kato, Hideaki Kiyoshi

Abstract

This study examines the significance of short-sales constraints in the presence of a centralized lendable securities market in Japan. We find evidence that a centralized lendable securities market experiences lower short sales constraints. The cost of borrowing stock is found to be lower in Japan's centralized lendable securities market compared with a non-centralized lendable securities market. We also find evidence that recall risk is lower in a centralized lendable securities market. Additionally, there is evidence that stocks are not systematically overvalued in the presence of the centralized lendable securities market. These results are robust when alternative measures of short-sales constraints are considered.

Suggested Citation

  • Khan, Mostafa Saidur Rahim & Bremer, Marc & Kato, Hideaki Kiyoshi, 2018. "Are short-sales constraints binding when there is a centralized lendable securities market? Evidence from Japan," Journal of the Japanese and International Economies, Elsevier, vol. 48(C), pages 85-96.
    • Handle: RePEc:eee:jjieco:v:48:y:2018:i:c:p:85-96
    DOI: 10.1016/j.jjie.2017.11.003
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    Cited by:

    1. Khan, Mostafa Saidur Rahim & Kato, Hideaki Kiyoshi & Bremer, Marc, 2019. "Short sales constraints and stock returns: How do the regulations fare?," Journal of the Japanese and International Economies, Elsevier, vol. 54(C).

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    More about this item

    Keywords

    Short-sales; Centralized securities lending; Recall risk; Overvaluation; Pricing;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting

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