Abstract
We study how ownership structure affects short selling in 40 stock markets around the world. We show that ownership by non-institutional blockholders reduces the supply of lendable shares available to short sellers, whereas ownership by foreign institutions increases it, and more strongly than domestic institutions. We establish causality by exploiting additions to the MSCI index as plausibly exogenous shocks to ownership structure. Our findings indicate that the effect of ownership structure on lending supply originates from the owners' connections (or the lack thereof) to equity lending market intermediaries and has consequences for short-selling activities globally.