Well-connected short-sellers pay lower loan fees: a market-wide analysis

Título: Well-connected short-sellers pay lower loan fees: a market-wide analysis

Autores: CHAGUE, Fernando, DE-LOSSO, Rodrigo, GENARO, Alan, GIOVANNETTI, Bruno C.

Resumo: High loan fees generate short-selling constraints and, therefore, reduce price efficiency. Despite the importance of loan fees, empirical evidence on their determinants is scarce. Using a market-wide deal-by-deal data set on the Brazilian equity lending market which uniquely identifies borrowers, brokers, and lenders, we are able to construct a proxy of search costs at the borrower-stock-day level. We find that – for the same stock, on the same day – borrowers with higher search costs pay significantly higher loan fees. Our results suggest that regulators should encourage the use of a centralized lending platform to reduce search costs in the lending market.

Data de publicação: 2016

Periódico/Editora: Journal of Financial Economics

Edição: a ser publicado

Palavras-chave: loan fees, search-costs, lending market, short-selling restrictions