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Systemic risk in the Chinese financial system: A panel Granger causality analysis

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  • Cincinelli, Peter
  • Pellini, Elisabetta
  • Urga, Giovanni

Abstract

In this paper, we investigate China’s changing financial interconnectedness via the presence of Granger-causality between firm level factors (Leverage, Market To Book Value and Returns) and systemic risk measures (ΔCoVaR, MES, and SRISK ). The analysis is based on 161 Chinese financial intermediaries (14 Traditional Banks, 16 Finance Services, 131 Real Estate Finance Developers) continuously listed over the period 2007:1–2021:1. We find that, in addition to traditional banks, finance companies and real estate finance developers pose systemic threats to the Chinese financial system, in particular during the Global Financial Crisis and the 2015 Chinese stock crash. Finally, the outbreak of COVID-19 pandemic has put under strain the Chinese financial system, in particular the finance services.

Suggested Citation

  • Cincinelli, Peter & Pellini, Elisabetta & Urga, Giovanni, 2022. "Systemic risk in the Chinese financial system: A panel Granger causality analysis," International Review of Financial Analysis, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:finana:v:82:y:2022:i:c:s1057521922001405
    DOI: 10.1016/j.irfa.2022.102179
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    More about this item

    Keywords

    Systemic risk; Systemic risk measures; Granger-non causality; Panel data;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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