@article{Kranz2019,
title = {Predatory Short Sales and Bailouts},
author = {Sebastian Kranz and Gunter Löffler and Peter N Posch},
url = {https://onlinelibrary.wiley.com/doi/pdf/10.1111/geer.12173?casa_token=efIU8MJ8ur4AAAAA:dkGui0Cs_vIQmp9LAEqt_x5DLqQGWMLMorrE7gaFZrbFwXe-FDXz34j18sxZfTu02kUXqqGuiDw0dQ},
year = {2019},
date = {2019-12-07},
journal = {German Economic Review},
volume = {20},
number = {4},
pages = {e469-e491},
abstract = {This paper extends the literature on predatory short selling and bailouts through a joint analysis of the two. We consider a model with informed short sales, as well as uninformed predatory short sales, which can trigger the inefficient liquidation of a firm. We obtain several novel results: A government commitment to bail out insolvent firms with positive probability can increase welfare because it selectively deters predatory short selling without hampering desirable informed short sales. Contrasting a common view, bailouts can be optimal ex ante but undesirable ex post . Furthermore, bailouts in our model are a better policy tool than short selling restrictions. Welfare gains from the bailout policy are unevenly distributed: shareholders gain while taxpayers lose. Bailout taxes allow ex ante Pareto improvements.},
keywords = {government bailouts, predatory trading, short sale bans, short sales},
pubstate = {published},
tppubtype = {article}
}