Manipulation, panic runs, and the short selling ban

• 成果类型: Article
• 署名作者: Gao, Pingyang; Jiang, Xu; Lu, Jinzhi
• 署名单位: University of Hong Kong; Duke University; City University of Hong Kong
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2024.105939
• 发表日期: 2025
• 关键词: Short selling regulation; Feedback effect; strategic complementarity; Bank runs

摘要

Short selling regulation has been a longstanding topic of debate in financial markets, particularly during times of crisis. While proponents argue that short selling aids in price discovery and market efficiency, critics raise concerns about manipulative short selling practices that can destabilize markets. This paper presents a theoretical model to analyze the impact of short selling, specifically manipulative short selling (MSS), on bank runs and efficiency. The model demonstrates that MSS can emerge as an equilibrium outcome driven by uninformed speculators seeking to profit from artificially depressing stock prices. The prevalence of MSS is influenced by the level of informed trading and coordination friction among creditors. We find that short selling bans can enhance welfare by mitigating the negative effects of MSS, particularly in scenarios with high coordination frictions. We also provide policy and empirical implications.