Predatory Short Selling
Financial institutions may be vulnerable to predatory short selling. When the stock of a financial institution is shorted aggressively, leverage constraints imposed by short-term creditors can force the institution to liquidate long-term investments at fire sale prices. For financial institutions that are sufficiently close to their leverage constraints, predatory short selling equilibria co-exist with no-liquidation equilibria (the vulnerability region) or may even be the unique equilibrium outcome (the doomed region). Increased coordination among short sellers expands the doomed region, where liquidation is the unique equilibrium. Our model provides a potential justification for temporary restrictions on short selling of vulnerable institutions and can be used to assess recent empirical evidence on short-sale bans
Year of publication: |
2013
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Authors: | Brunnermeier, Markus K. |
Other Persons: | Oehmke, Martin (contributor) |
Publisher: |
[2013]: [S.l.] : SSRN |
Subject: | Theorie | Theory | Leerverkauf | Short selling | Finanzmarktregulierung | Financial market regulation | Verdrängungswettbewerb | Predatory pricing | Finanzkrise | Financial crisis | Kapitalstruktur | Capital structure | Bankenkrise | Banking crisis | Finanzsektor | Financial sector |
Saved in:
freely available
Extent: | 1 Online-Ressource (52 p) |
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Series: | NBER Working Paper ; No. w19514 |
Type of publication: | Book / Working Paper |
Language: | English |
Notes: | Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments October 2013 erstellt |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10013074650