Risk Contagion of Bank-firm Credit Network: Evidence from China

20 Pages Posted: 19 Mar 2020

See all articles by Qingmin hao

Qingmin hao

College of Management and Economics, Tianjin University

Jim Huangnan Shen

Center for International Development, Harvard Kennedy School, Harvard University

Chien-Chiang Lee

Nanchang University

Date Written: February 25, 2020

Abstract

In order to explore the effect of China’s listed companies’ credit on banking system risks, this research employs the network topology method to build a bank–firm credit network of loans between banks and those listed companies and examines the dynamic topology of these network risks to the banking system. The results show that the credit network has a hierarchical core–margin structure, whereby Bank of China and China Merchants Bank are respectively key pivots for state-owned banks and stock-holding banks to control the contagion in the network. The decentralized structure of banks’ credit network effectively reduces risk to the banking system. Moreover, the average path length, network connectivity ratio, betweenness centrality, and degree of correlation in the credit network distinctly affect the banking system’s risk, thus making these characteristics suitable targets for the regulation and monitoring of such risk.

Keywords: Complex network, Bank–firm credit; Systemic risks; Risk management; China

JEL Classification: G01, F15, G15, L14

Suggested Citation

hao, Qingmin and Shen, Jim Huangnan and Lee, Chien-Chiang, Risk Contagion of Bank-firm Credit Network: Evidence from China (February 25, 2020). Available at SSRN: https://ssrn.com/abstract=3543864 or http://dx.doi.org/10.2139/ssrn.3543864

Qingmin Hao

College of Management and Economics, Tianjin University ( email )

92, Weijin Road
Nankai District
Tianjin, Tianjin 300072
China

Jim Huangnan Shen (Contact Author)

Center for International Development, Harvard Kennedy School, Harvard University ( email )

One Eliot Street Building
79 JFK Street
Cambridge, MA 02138
United States

Chien-Chiang Lee

Nanchang University ( email )

999 Xuefu Avenue
Hong Gu Tan New District
Nanchang, Jiangxi 330031
China
330031 (Fax)

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