Share pledge financing network and systemic risks: Evidence from China

Xiao Qin and Ze Wang

Journal of Banking & Finance, 2023, vol. 152, issue C

Abstract: We document a unique determinant of financial systemic risks in China, share pledge financing (SPF) network, by studying all listed Chinese financial institutions that provide SPF business. As one of the most popular refinancing tools in China, SPF formulates a network among financial institutions with common collaterals. We propose a centrality measure to quantify such network effects, and document that banks are more important than securities in the SPF network before 2018, but this pattern has reversed afterwards. SPF network effects, rather than SPF margin closeout risks, significantly increase systemic risks of China's financial institutions, by increasing both individual risks of financial institutions and connectedness among them. Such an impact of the SPF network on systemic risks is more pronounced in OTC markets than in exchanges. The SPF network affects systemic risks in more extreme cases, while SPF margin closeout risks affect systemic risks in more moderate cases.

Keywords: Share pledge financing; Network; Systemic risk; Financial institutions; China (search for similar items in EconPapers)
JEL-codes: C10 G21 G32 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:152:y:2023:i:c:s037842662300095x

DOI: 10.1016/j.jbankfin.2023.106871

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