Why do US banks react differently to short selling bans?

ALIANO, MAURO;Previati D;Galloppo G;Paimanova V.

2017-01-01

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Abstract

Short-selling ban caught high attention of policy modeling in different countries. Our paper is one of the first to explain the evidence of different bank price reactions in terms of country and stock market conditions, and to consider both stock price reaction and risk side. All in all, our findings suggest that the impact of the ban on the overall market efficiency is heterogeneous and, in most cases, modest for the countries analyzed. Indeed, you either do not observe any improvements or they are only short-lived. This paper checks the short selling response of US Banks, listed in the Sp500 in 2008. For the first time, we document that Banks react to ban restrictions differently, mostly because of their variety in terms of Fundamental factors (Balance sheet indicators). Considering that, US banks show different reactions to the ban on short selling. Policy makers should decide, which of firm characteristics are better to choose, and whether interventions are effective on the market.