Interconnectedness, systemic risk, and the influencing factors: Some evidence from China’s financial institutions

Shan Wu, Mu Tong, Zhongyi Yang and Tianyi Zhang

Physica A: Statistical Mechanics and its Applications, 2021, vol. 569, issue C

Abstract: From the perspective of interconnectedness, we construct a systemic risk spillover network of China’s financial institutions. After deconstructing the constructed network and combine with the analysis of the influencing factors, we find that: (i) All industries and institutions within the financial system are highly interconnected, and each sector can act as a risk receiver or risk driver. (ii) During the extreme market conditions, the connectedness between each two financial institutions will increase dramatically. (iii) The network of China’s financial institutions has the characteristics of “small world” and “scale-free”, and the overall connection of network structure has significant time-varying characteristics. (iv) The asset size, leverage ratio, SRISK index of financial institutions will influence their connection degree positively, while the current ratio of financial institutions and changes of the real estate climate index have the opposite impacts. Our findings hold important implications for regulations.

Keywords: Systemic risk; Financial institutions; Interconnectedness; Financial crisis (search for similar items in EconPapers)
JEL-codes: C51 G20 G28 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:569:y:2021:i:c:s0378437121000376

DOI: 10.1016/j.physa.2021.125765

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