ZBB 2021, 301

RWS Verlag Kommunikationsforum GmbH & Co. KG, Köln RWS Verlag Kommunikationsforum GmbH & Co. KG, Köln 2199-1715 Zeitschrift für Bankrecht und Bankwirtschaft ZBB 2021 AufsätzeKatja Langenbucher* / Loriana Pelizzon**

Short Selling – On Ethics, Politics, and Culture

Lawyers and economists do not always speak the same language. Where economists present crisp and clear numbers, lawyers get lost in lengthy discussions about fairness and justice. Or so it seems.1 Arguably, the regulation of short selling illustrates a worrying clash of cultures. Economists understand short selling as a value-free market mechanism while (not only) lawyers suspect a profit, unfairly gained at the expense of others: “Short sellers not only profit from the misery of others, they also cause it”.2 In what follows, we address implications of this culture clash in the realm of ethics and politics. We conclude with a hypothesis, submitting that there might be traces of another clash to be observed when comparing regulatory cultures across countries. A preliminary look at data3 seems to suggest that short sale bans are less common in countries with a strong capital-market tradition and more common for countries which are newer to this game. If this holds true, important lessons are to be learned for the European Commission’s plan to set up a capital market union.


  • I. Short Selling and Ethics
    • 1. The Role of Short Sellers for the “proper functioning of financial markets”
      • 1.1 Efficient Price Formation: Theory
      • 1.2 Efficient Price Formation: Data
      • 1.3 Efficient Price Formation: Avoiding Market Bubbles
      • 1.4 Efficient Price Formation: Enhancing Market Liquidity
    • 2. Still: Are Short Sellers “Dark Destroyers”?
      • 2.1 Feedback Effects
      • 2.2 Predatory Short Selling and the Damage Caused
      • 2.3 The Toothless Threat of Market Manipulation
      • 2.4 Preventive Short Sale Bans?
  • II. Short Selling and Politics
    • 1. Governments in Crisis
      • 1.1 Short Sale Bans and Financial Crises
      • 1.2 Reaching Beyond Financial Crises
    • 2. Short Selling for Impact
    • 3. Political Short Sellers – “Dark Destroyers” of a Different Kind?
  • III. Summary: The Ethics and Politics of Short Selling
  • IV. Looking ahead: Short Selling and Culture?
Prof. Dr., Goethe University, House of Finance, Frankfurt; affiliated professor at SciencesPo, Paris; long-term guest professor at Fordham Law School, NYC; Fellow with the Leibniz Institute for Financial Research SAFE; PI ZEVEDI-group on AI and Finance.
Prof. Dr., Goethe University, Frankfurt; Department Director “Financial Markets” at Leibniz Institute for Financial Research SAFE, Frankfurt; part-time professor at Ca’Foscari University of Venice; Research Affiliate at MIT Sloan.
See in more detail Langenbucher (2017), pp. 74 et seq. for critique.
From a business ethics perspective: Angel/McCabe (2009a), p. 239 (note that they do not endorse this view); more generally on the ethics of speculation: Angel/McCabe (2009b), p. 277.
Della Corte, Kosowski, and Rapanos (2020).

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