EconPapers    
Economics at your fingertips  
 

Measuring the contribution of Chinese financial institutions to systemic risk: an extended asymmetric CoVaR approach

Fenghua Wen, Kaiyan Weng and Wei-Xing Zhou ()
Additional contact information
Fenghua Wen: Central South University
Kaiyan Weng: Central South University
Wei-Xing Zhou: East China University of Science and Technology

Risk Management, 2020, vol. 22, issue 4, No 2, 310-337

Abstract: Abstract This study proposes an extension of the Asymmetric CoVaR method in Espinosa et al. (J Bank Finance 58: 471–485, 2015) to capture the time-varying asymmetric responses of the financial system to positive and negative shocks to individual institutions. Building on the extended method and considering a set of Chinese financial institutions, we assess the extent to which distress within different institutions contribute to systemic risk. To provide a formal ranking of risk contributions, we implement the significance and dominance tests with bootstrap Kolmogorov–Smirnov statistics. The estimates of the extended Asymmetric CoVaR method reveal an asymmetric pattern that characterizes the tail interdependence in the Chinese financial system and this pattern changes dynamically over time. Particularly, the impact on the system of a fall in individual market value is only slightly larger than that of an increase during tranquil years. However, the entire system becomes extremely sensitive to downside losses than to upside gains during crises. The result also raises concern about privately owned banks in that they are systemically riskier than state-owned banks and other institutions. Using panel regressions, we also find firm characteristics such as institution size and volatility are important predictors of systemic risk contribution.

Keywords: Systemic risk; Tail-risk dependence; Asymmetric CoVaR; Time-varying (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1057/s41283-020-00064-1 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:risman:v:22:y:2020:i:4:d:10.1057_s41283-020-00064-1

Ordering information: This journal article can be ordered from
https://www.palgrave.com/gp/journal/41283

DOI: 10.1057/s41283-020-00064-1

Access Statistics for this article

Risk Management is currently edited by Igor Loncarski

More articles in Risk Management from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

 
Page updated 2021-05-29
Handle: RePEc:pal:risman:v:22:y:2020:i:4:d:10.1057_s41283-020-00064-1