| dc.description.abstract | This thesis examines the impact of the short-selling bans implemented across six European countries during the Covid-19 pandemic in March 2020, with a focus on their effects on firms of different market capitalizations. Utilizing a difference-in-difference methodology, this study assesses the effects of these bans on market liquidity and returns, exploring whether these interventions served as protective measures or merely reactive strategies. The results indicate that the short-selling bans led to increased bid-ask spreads and higher levels of Amihud illiquidity measure. The bans disproportionately impacted smaller market-cap stocks, both in terms of returns and market quality. Additionally, the bans are associated with a statistically significant positive announcement effect on stock prices; however, this effect diminishes over the entire ban period, with abnormal returns becoming negative for stocks affected by the ban. Lastly, the study explores the determinant factors of these regulatory decisions, revealing that economic vulnerability and systemic financial risks were significant determinants in the enactment of short-selling bans. This research contributes to the ongoing debate about the efficacy of short-selling bans, suggesting that such interventions might have unintended adverse effects on market dynamics. | |
