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Does COVID-19 matter for systemic financial risks? Evidence from China's financial and real estate sectors

Wenli Huang, Cheng Lan, Yueling Xu, Zhaonan Zhang and Haijian Zeng

Pacific-Basin Finance Journal, 2022, vol. 74, issue C

Abstract: The occurrence of global public safety incidents often affects systemic financial risk. Based on the event analysis method, this study provides a specific analysis of COVID-19's impact on China's financial systemic risks. Additionally, the study demonstrates the different features of systemic financial risk in different financial sectors (banking, securities, insurance) and real estate during the COVID-19 outbreak. Specifically, first, COVID-19's influence on systemic financial risk in all sectors exhibits both level effect and trend effect, and the impact is particularly significant in branch sectors under real estate. Second, in the entire financial system, the securities and real estate sectors not only contribute more to the growth of systemic risk than the banking and insurance sectors but are also more persistent. Third, real estate, residential property, and park comprehensive industries with high debt, long cycles, and high financial dependence are less affected by COVID-19 on systemic financial risks than other industries. Fourth, in the transmission mechanism, COVID-19 impacts market liquidity, funding liquidity, and default risk in the financial sector and real estate sector; however, the sources of systemic risk in different sectors differ.

Keywords: Systemic risk; COVID-19 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:74:y:2022:i:c:s0927538x22001147

DOI: 10.1016/j.pacfin.2022.101819

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