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Does textual risk information from individual banks exacerbate systemic risk? Evidence from the Chinese banking system

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  • Li, Zhinan
  • Ren, Yaqi
  • Shen, Peilong
  • Zhang, Can

Abstract

This paper investigates whether textual risk information from individual banks exacerbates systemic risk in the Chinese banking system. In doing so, it addresses an important gap in traditional financial risk theory in which the role of information dissemination in amplifying systemic risk is ignored. Using 2018–2022 data covering 24 Chinese listed commercial banks, we employ a panel fixed effects model to assess how each bank's textual risk information influences industry risk and systemic risk. We construct a novel textual risk information index based on online financial news and investor discussions. We find that textual risk information significantly affects the risk of the banking industry and exacerbates systemic risk. Further analysis demonstrates that asset size plays a limited role in differentiating the impact of risk information on systemic risk, which indicates that larger banks do not disclose enough risk information. These findings suggest an information-driven perspective for bank risk measurement and early warning in financial risk management.

Suggested Citation

  • Li, Zhinan & Ren, Yaqi & Shen, Peilong & Zhang, Can, 2025. "Does textual risk information from individual banks exacerbate systemic risk? Evidence from the Chinese banking system," Economic Modelling, Elsevier, vol. 152(C).
    • Handle: RePEc:eee:ecmode:v:152:y:2025:i:c:s0264999325002469
    DOI: 10.1016/j.econmod.2025.107251
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