Short Sellers, Short-Selling Bans, and Price Dynamic Changes: Evidence from Taiwan(1/3)

Project Details


Most stock market regulators around the world impose short sales bans or constraints to limit the marketdrop during the 2008 financial crisis. Recently, many studies address the issues regarding short sellingactivity or bans on short sales. The effect of short bans or constraints on market performance is controversial.Despite the positive view suggests that short sale bans can mitigate the negative returns during the financialcrisis, the dark side criticizes that restrictions on short sales prevent negative information from beingefficiently incorporated into stock prices.In Taiwan stock market, short position can be established through two different avenues. One is the shortselling on margin account, which is the exclusively used by individual investors. The other one is shortselling on Securities Borrowing and Lending (SBL) account, which the participants are limited to specificinstitutional investors. The SBL system was established by Taiwan Stock Exchange in June 2003, to facilitatethe stock borrowing and lending business for market participants.Using the Taiwan SBL system data and short selling data, this three-year research project will explorethe following four topics: (1) Introducing to Taiwan SBL system, and examining the determinants of stocklending fees and the association between the lending fees and subsequent stock returns. (2) Observing theshort selling activity around the stock issuances, and exploring the relation of shorts andunderpricing/oversubscription of the SEOs. (3) Which shorts are informed? (4) On November 2011, Taiwanadopted a stringent rule for the ceiling to monitor the total volume of short selling shares. We will empiricallytest the effect of short selling ceiling on market performance.
Effective start/end date1/08/1531/07/16

UN Sustainable Development Goals

In 2015, UN member states agreed to 17 global Sustainable Development Goals (SDGs) to end poverty, protect the planet and ensure prosperity for all. This project contributes towards the following SDG(s):

  • SDG 10 - Reduced Inequalities
  • SDG 11 - Sustainable Cities and Communities
  • SDG 17 - Partnerships for the Goals


  • Stock lending
  • Short selling
  • Market performance


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