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- Publisher Website: 10.1287/mnsc.2014.1997
- Scopus: eid_2-s2.0-84926674786
- WOS: WOS:000352495300007
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Article: Short-selling attacks and creditor runs
Title | Short-selling attacks and creditor runs |
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Authors | |
Keywords | Coordination Short-selling attacks Information asymmetry Feedback Creditor runs |
Issue Date | 2015 |
Citation | Management Science, 2015, v. 61, n. 4, p. 814-830 How to Cite? |
Abstract | © 2015 INFORMS. This paper investigates the mechanism through which short selling of a bank's stocks can trigger the failure of the bank. In the model, creditors, who learn information from stock prices, will grow increasingly unsure about the bank's true fundamentals in facing noisier stock prices; thus a run on the bank is more likely because of creditors' concave payoff. Understanding this, speculators conduct short selling beforehand to amplify (il)liquidity and add noise to stock prices, triggering a bank run, and subsequently profit from the bank's failure. We show that short-selling attacks on a bank involve two runs: the aggressive run among speculators and the conservative run among creditors. These two runs interact and reinforce each other, with compound feedback loops that drastically increase the probability of the collapse of the bank. We discuss policy implications of the model. |
Persistent Identifier | http://hdl.handle.net/10722/279316 |
ISSN | 2023 Impact Factor: 4.6 2023 SCImago Journal Rankings: 5.438 |
SSRN | |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Liu, Xuewen | - |
dc.date.accessioned | 2019-10-28T03:02:18Z | - |
dc.date.available | 2019-10-28T03:02:18Z | - |
dc.date.issued | 2015 | - |
dc.identifier.citation | Management Science, 2015, v. 61, n. 4, p. 814-830 | - |
dc.identifier.issn | 0025-1909 | - |
dc.identifier.uri | http://hdl.handle.net/10722/279316 | - |
dc.description.abstract | © 2015 INFORMS. This paper investigates the mechanism through which short selling of a bank's stocks can trigger the failure of the bank. In the model, creditors, who learn information from stock prices, will grow increasingly unsure about the bank's true fundamentals in facing noisier stock prices; thus a run on the bank is more likely because of creditors' concave payoff. Understanding this, speculators conduct short selling beforehand to amplify (il)liquidity and add noise to stock prices, triggering a bank run, and subsequently profit from the bank's failure. We show that short-selling attacks on a bank involve two runs: the aggressive run among speculators and the conservative run among creditors. These two runs interact and reinforce each other, with compound feedback loops that drastically increase the probability of the collapse of the bank. We discuss policy implications of the model. | - |
dc.language | eng | - |
dc.relation.ispartof | Management Science | - |
dc.subject | Coordination | - |
dc.subject | Short-selling attacks | - |
dc.subject | Information asymmetry | - |
dc.subject | Feedback | - |
dc.subject | Creditor runs | - |
dc.title | Short-selling attacks and creditor runs | - |
dc.type | Article | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.1287/mnsc.2014.1997 | - |
dc.identifier.scopus | eid_2-s2.0-84926674786 | - |
dc.identifier.volume | 61 | - |
dc.identifier.issue | 4 | - |
dc.identifier.spage | 814 | - |
dc.identifier.epage | 830 | - |
dc.identifier.eissn | 1526-5501 | - |
dc.identifier.isi | WOS:000352495300007 | - |
dc.identifier.ssrn | 1780240 | - |
dc.identifier.issnl | 0025-1909 | - |