IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2609.08881.html

The Double-Edged Sword of Short-Selling Bans

Author

Listed:
  • Pasquale Della Corte
  • Robert Kosowski
  • Dimitris Papadimitriou
  • Nikolaos P. Rapanos

Abstract

We develop a theoretical model that endogenizes the regulator's decision to impose short-selling bans to prevent large stock price declines. Empirically, we test the model's predictions using the cross-sectional variation in short-selling restrictions implemented across European countries in 2020. Consistent with our model, we find that bans had a detrimental effect on liquidity and failed to support the average price levels, but were effective in limiting large price drawdowns. Finally, we show that the effectiveness of the bans depends on the share of informed stockholders, a central variable in our framework, thus informing the design of more effective regulatory responses.

Suggested Citation

  • Pasquale Della Corte & Robert Kosowski & Dimitris Papadimitriou & Nikolaos P. Rapanos, 2026. "The Double-Edged Sword of Short-Selling Bans," Papers 2609.08881, arXiv.org.
    • Handle: RePEc:arx:papers:2609.08881
    as

    Download full text from publisher

    File URL: https://arxiv.org/pdf/2609.08881
    File Function: Latest version
    Download Restriction: no
    ---><---

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2609.08881. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: https://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.