TY - JOUR
T1 - Interconnectedness, systemic risk, and the influencing factors
T2 - Some evidence from China's financial institutions
AU - Wu, Shan
AU - Tong, Mu
AU - Yang, Zhongyi
AU - Zhang, Tianyi
N1 - Publisher Copyright:
© 2021 Elsevier B.V.
PY - 2021/5/1
Y1 - 2021/5/1
N2 - 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.
AB - 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.
KW - Financial crisis
KW - Financial institutions
KW - Interconnectedness
KW - Systemic risk
UR - http://www.scopus.com/inward/record.url?scp=85099782230&partnerID=8YFLogxK
U2 - 10.1016/j.physa.2021.125765
DO - 10.1016/j.physa.2021.125765
M3 - Article
AN - SCOPUS:85099782230
SN - 0378-4371
VL - 569
JO - Physica A: Statistical Mechanics and its Applications
JF - Physica A: Statistical Mechanics and its Applications
M1 - 125765
ER -