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Social norms and stock lending

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  • Jiang, Danling
  • Liu, Baixiao
  • Xiao, Steven Chong

Abstract

We examine how social norms measured by religiosity influence institutional investors’ willingness to lend stock and constrain short selling in the U.S. markets. We find that firms with blockholders located in higher religiosity areas are associated with lower supply and higher utilization of lendable shares, but are not related to the demand for stock borrowing. Short interest, utilization rates, and lending fees, when combined with high blockholder religiosity, are stronger negative predictors of future stock returns. Our findings suggest that the social norms of institutional investors serve as a source of limits to arbitrage, which hinders market efficiency through stock lending.

Suggested Citation

  • Jiang, Danling & Liu, Baixiao & Xiao, Steven Chong, 2025. "Social norms and stock lending," Journal of Financial Markets, Elsevier, vol. 76(C).
    • Handle: RePEc:eee:finmar:v:76:y:2025:i:c:s138641812500031x
    DOI: 10.1016/j.finmar.2025.100991
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    References listed on IDEAS

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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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