Do China’s Non-Financial Firms Affect Systemic Risk?

Zhu, Bin; Mao, Huafu; Huang, Yu‐An; Lin, Renda; Niu, Feng

doi:10.1080/1540496x.2018.1562893

Cited by 6 publications

(5 citation statements)

References 28 publications

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“…This suggests that the relationship between the industry's system risk contribution and industry characteristics is more significant. Our findings are similar to those of Berger et al [43], who claimed that return on assets is positively related to systemic risk, Chiu et al [2], who found that market-to-book ratios have a significant negative relationship with the industry system risk, and Zhu et al [3], who found the firm size has a significantly negative effect on systemic risk contribution. The monetary policy proxy variables (RETE and RR) showed significant negative associations with system risk indicators, suggesting that an industry's systemic risk-taking level will increase as the real interest rates or statutory reserve ratios decrease.…”

Section: Regression Analysissupporting

confidence: 91%

“…Since the 2008 global financial crisis, systemic risk contagion and its influencing factors has become the focus of academic circles and regulatory authorities. Incentives for systemic risk may come from within the financial system (such as bank failure and the collapse of financial market prices) and from external financial systems (such as macroeconomic reform and the decline of a national economy's pillar industries) [1][2][3]. Numerous studies have shown that non-financial industries are also associated with systemic risk [4][5][6][7].…”

Section: Introductionmentioning

confidence: 99%

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Monetary Policy, Industry Heterogeneity and Systemic Risk—Based on a High Dimensional Network Analysis

Huang

Drakeford

2019

Sustainability

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We utilized a high dimensional financial network to investigate the systemic risk contagion between different industries in China and to explore the impacts of monetary policy and industry heterogeneity factors. The empirical results suggest that the total level of systemic risk increased quite significantly during the 2008 global crisis and the 2015–2016 Stock Market Disaster. The energy, material, industrial, and financial sectors are the top systemic risk contributors. Industry heterogeneity variables such as the leverage ratio, book-to-market ratio, return on assets (ROA) and size have significant impacts on the systemic risk, but their effects on the systemic risk contribution are more pronounced than those on the systemic risk sensitivity. Moreover, monetary policy can effectively suppress the systemic risk diffusion derived from the leverage ratio. These results are essential for investors and regulators of risk management.

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Section: Regression Analysissupporting

confidence: 91%

Section: Introductionmentioning

confidence: 99%

Monetary Policy, Industry Heterogeneity and Systemic Risk—Based on a High Dimensional Network Analysis

Huang

Drakeford

2019

Sustainability

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“…Cucinelli and Soana (2023), examine the corporate governance mechanism of US non-financial corporations listed in the S&P 500 and posit that the corporate governance mechanism of nonfinancial firms has a significant positive effect on systemic risk contribution and systemic risk susceptibility. Apart from this, Zhu et al (2020) conducted an analysis of firms in China and discovered that both financial and non-financial firms have the capacity to exert substantial spillover effects on the financial system. Some nonfinancial firms in developing economies have special financing relationships with other firms, and any potential shock in the financial sector can be produced by these nonfinancial firms.…”

Section: Systemic Risk and Non-financial Firmsmentioning

confidence: 99%

“…Furthermore, prior studies that focused on both financial and nonfinancial sectors largely focused on developed economies with very little or no attention given to developing economies. Various Studies such as (Anginer et al, 2018;Cucinelli & Soana, 2023;Dungey et al, 2022;Dungey et al, 2018;Poledna et al, 2018;Van Cauwenberge et al, 2019;Zhu et al, 2020) have assessed different sets of firms including US, Austrian, Dutch, and Chinese financial and non-financial firms. Their collective findings indicate that non-financial firms pose systemic risk.…”

Section: Introductionmentioning

confidence: 99%

A Systemic Contribution and Vulnerability of Non-financial Firms: A Cross Industry Analysis

Azam,

Raheman,

Rashid

2023

NIJBM

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This paper quantifies the systemic importance of non-financial firms by assessing their contribution and vulnerability to systemic shocks. We apply two firm-specific measures, namely Delta CoVaR (ΔCoVaR) and Marginal Expected Shortfall (MES), to evaluate the systemic risk of 205 non-financial firms listed on the Pakistan Stock Exchange over the period from 2005-2021. We apply quantile regression methodology to quantify (ΔCoVaR). We confirm that a significant number of firms contribute to both system-wide shocks and are vulnerable to systemic risk of the whole system. We find that firms with a high-risk score in one area are not always high-risk in another. Measures of systemic risk vary significantly across time, between firms and industries. Energy and transport industries are top contributors to systemic risk however, tobacco and pharmaceuticals are among the top industries that are vulnerable to systemic risk of the whole system. We conclude that non-financial firms are systemically important and this risk should be mitigated. This research offers significant insights for policymakers and other relevant stakeholders both domestically and internationally. It aims to help policymakers examine their macro-prudential policy, which now solely takes into account financial firms, to limit the risk that can spread throughout the entire system.

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“…The edges of guarantee network represent that the guarantors are responsible for the debt of guaranteed enterprises once the guaranteed enterprises default. Due to network intensity and inter-dependencies, the non-financial sector contribution to systemic risk is pivotal and more influential than the financial sector (Zhu et al ., 2020). This means that risk contagion, which means the financial risk spread from one to others, is not only associated with financial institutions but also prevails in firm-level networks [1].…”

Section: Introductionmentioning

confidence: 99%

Cascading failure in guarantee networks from the perspective of equilibrium

Ren

Liu

Zhu

2023

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PurposeThe purpose of this paper is to test the invulnerability of the guarantee network at the equilibrium point.Design/methodology/approachThis paper introduces a tractable guarantee network model that captures the invulnerability of the network in terms of cascade-based attack. Furthermore, the equilibrium points are introduced for banks to determine loan origination.FindingsThe proposed approach not only develops equilibrium analysis as an extended perspective in the guarantee network, but also applies cascading failure method to construct the guarantee network. The equilibrium points are examined by simulating experiment. The invulnerability of the guarantee network is quantified by the survival of firms in the simulating progress.Research limitations/implicationsThere is less study in equilibrium analysis of the guarantee network. Additionally, cascading failure model is expressed in the presented approach. Moreover, agent-based model can be extended in generating the guarantee network in the future study.Originality/valueThe approach of this paper presents a framework to analyze the equilibrium of the guarantee network. For this, the systemic risk of the whole guarantee network and each node's contribution are measured to predict the probability of default on cascading failure. Focusing on cascade failure process based on equilibrium point, the invulnerability of the guarantee network can be quantified.

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Do China’s Non-Financial Firms Affect Systemic Risk?

Cited by 6 publications

References 28 publications

Monetary Policy, Industry Heterogeneity and Systemic Risk—Based on a High Dimensional Network Analysis

Monetary Policy, Industry Heterogeneity and Systemic Risk—Based on a High Dimensional Network Analysis

A Systemic Contribution and Vulnerability of Non-financial Firms: A Cross Industry Analysis

Cascading failure in guarantee networks from the perspective of equilibrium

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