Crisis and Non-Crisis Short Selling and Bank Enforcement Actions

Leslie Boni, J. Chris Leach, Reilly S. White

Research output: Contribution to journalArticlepeer-review


Employing standard informed trading intuition, we develop testable hypotheses regarding short selling before and after bank enforcement action (EA) initiations. For U.S.-listed bank firm data for 2007 to 2012, we find strong support for differentiated short seller activity and skill in crisis versus non-crisis periods. In financial crises, short sellers predominantly position prior to EAs. The EA initiations then act as information-homogenizing and profit-taking events reducing incentives to remain positioned. In contrast, EAs in non-crisis periods appear to serve as wake-up calls that attract additional short selling. Our findings offer potentially important insights for regulators considering short sellers’ reactions to EA announcements in general, during financial crises, and when not experiencing a broad financial crisis.

Original languageAmerican English
JournalJournal of Banking Finance
StatePublished - Nov 1 2021


  • Enforcement actions
  • Short selling
  • Short interest
  • Regulation
  • Banking


  • Business

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