Financial regulators often react to certain crisis periods by restricting short-selling to stabilize the stock market. Recently, against the COVID-19 pandemic, the Korean government imposed a ban on short-selling in 2020 and has allowed a partial resumption only for larger stocks indexed in KOSPI200 and KOSDAQ150 since May of 2021. When the constituents of these indices are updated, newly indexed or excluded stocks experience exogenous shocks in short-selling regime. Using this quasi-natural experimental setting, we examine a pure impact of short-selling permission and ban. The results show that short-selling permission enhances stocks’ price efficiencies, while short-selling permission or ban does not strongly influence stock return and volatility. Overall, this paper supports the positive role of short-selling, by providing empirical evidence against arguments for banning short-selling.