Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Risks’ cross-contagion between shadow banks based on complex network theory: evidence from China

Risks’ cross-contagion between shadow banks based on complex network theory: evidence from China The purpose of this paper is to analyze the network path and internal mechanism of risks’ cross-contagion between shadow banks and design strategies for preventing risk infection between shadow banks.Design/methodology/approachUsing the complex network theory, analyze the mechanism of risks’ cross-contagion between shadow banks from the credit network, business relationship network (BRN) and social network (SN); the cross-contagion mechanism using the structural equation model on the basis of China’s shadow banks is tested; based on the three risk infection paths, the prevention and control strategies for risk infection using the mathematical models of epidemic diseases are designed.FindingsThere are three network risk contagion paths between shadow banks. One, the credit network, risks are infected crossly mainly through debt and equity relationships; two, the BRN, risks are infected crossly mainly through business network and macro policy transmission; three, investor SN, risks are infected crossly mainly through individual SN and fractal relationships. The following three strategies for preventing risk’s cross-contagion between shadow banks: one, the in advance preventing strategy is more effective than the ex post control strategy; two, increasing the risk management coefficient; three, reducing the number of risk-infected submarkets.Originality/valueThe research of this study, especially the strategies for preventing the risks’ cross-contagion, could provide theoretical and practical guidance for regulatory authorities in formulating risk supervision measures. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Kybernetes Emerald Publishing

Risks’ cross-contagion between shadow banks based on complex network theory: evidence from China

Jin, Li
Kybernetes , Volume 50 (6): 19 – Jul 6, 2021
Download PDF
19 pages

Loading next page...
 
/lp/emerald-publishing/risks-cross-contagion-between-shadow-banks-based-on-complex-network-5aI00mueqV
Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0368-492X
DOI
10.1108/k-04-2020-0236
Publisher site
See Article on Publisher Site

Abstract

The purpose of this paper is to analyze the network path and internal mechanism of risks’ cross-contagion between shadow banks and design strategies for preventing risk infection between shadow banks.Design/methodology/approachUsing the complex network theory, analyze the mechanism of risks’ cross-contagion between shadow banks from the credit network, business relationship network (BRN) and social network (SN); the cross-contagion mechanism using the structural equation model on the basis of China’s shadow banks is tested; based on the three risk infection paths, the prevention and control strategies for risk infection using the mathematical models of epidemic diseases are designed.FindingsThere are three network risk contagion paths between shadow banks. One, the credit network, risks are infected crossly mainly through debt and equity relationships; two, the BRN, risks are infected crossly mainly through business network and macro policy transmission; three, investor SN, risks are infected crossly mainly through individual SN and fractal relationships. The following three strategies for preventing risk’s cross-contagion between shadow banks: one, the in advance preventing strategy is more effective than the ex post control strategy; two, increasing the risk management coefficient; three, reducing the number of risk-infected submarkets.Originality/valueThe research of this study, especially the strategies for preventing the risks’ cross-contagion, could provide theoretical and practical guidance for regulatory authorities in formulating risk supervision measures.

Journal

Kybernetes – Emerald Publishing

Published: Jul 6, 2021

Keywords: Shadow bank; Financial risk; Complex network; The mathematical models of epidemic diseases; Structural equation model

References

  • Liquidity adjusted capital asset pricing model in an emerging market: liquidity risk in Borsa Istanbul
    Altay, E.; Çalgıcı, S.
  • Financial structure and financial contagion from the network perspective
    Bao, Q.; Sun, Y.
  • Industry characteristics and financial risk contagion
    Chiu, W.; Peña, J.I.; Wang, C.
  • Beyond common equity: the influence of secondary capital on bank insolvency risk
    Conlon, T.; Cotter, J.; Molyneux, P.
  • Cross infection risk of shadow banking from the perspective of business relations: Metrics based on the TGC model
    Fang, X.; Chen, C.
  • Credit constraint, shadow banking and monetary policy transmission in China
    Gao, R.; Chen, C.; Zeng, H.; Gong, L.
  • Integration and risk contagion in financial crises: evidence from international stock markets
    Gkillas, K.; Tsagkanos, A.; Vortelinos, D.I.
  • The financial crisis and the shadow price of bank capital
    Hasannasab, M.; Margaritis, D.; Staikouras, C.
  • Market risk-based capital requirements, trading activity, and bank risk
    Holod, D.; Kitsul, Y.; Torna, G.
  • Monetary policy, capital supervision and shadow banking: asymmetry research based on micro perspective
    Huang, Z.; Liu, D.
  • The nature of shadow bank leverage shocks on the macroeconomy
    Istiak, K.
  • The shadow costs of repos and bank liability structure
    Klimenko, N.; Moreno-Bromberg, S.
  • Economics of china’s shadow banking: definition, composition, and measurement
    Li, W.
  • Exploring global embodied metal flows in international trade based combination of multi-regional input-output analysis and complex network analysis
    Liang, X.; Yang, X.; Yan, F.; Li, Z.
  • Research on risk and supervision of China’s shadow banks
    Liao, R.; Ren, X.
  • Non-financial enterprises shadow banking business and operating risk
    Li, J.; Han, X.
  • Contagion risk in endogenous financial networks
    Li, S.; Sui, X.
  • Safety risk factors of metro tunnel construction in China: an integrated study with EFA and SEM
    Liu, W.; Zhao, T.; Zhou, W.; Tang, J.
  • Measuring financial market risk contagion using dynamic MRS-Copula models: the case of Chinese and other international stock markets
    Luo, C.; Xie, C.; Yu, C.; Xu, Y.
  • New dual-track of interest rate, business sector leverage differences and monetary policy transmission in China: based on a DSGE model with shadow banking system
    Ma, Y.; Chang, J.; Tong, M.
  • Systemic risk, financial contagion and financial fragility
    Martínez-Jaramillo, S.; Pérez, O.P.; Embriz, F.A.; Dey, F.L.G.
  • The financial crisis and the shadow price of bank Capital
    Maryam, H.; Dimitris, M.; Christos, S.
  • Transmission channels of systemic risk and contagion in the European financial network
    Paltalidis, N.; Gounopoulos, D.; Kizys, R.; Koutelidakis, Y.
  • The single supervision mechanism and contagion between bank and sovereign risk
    Sáiz, M.C.; Azofra, S.S.; Olmo, B.T.
  • China’s regional financial risk spatial correlation network and regional contagion effect: 2009-2016
    Shen, L.; Liu, Y.; Li, W.
  • Study on spatial correlations and contagion effect of regional financial
    Wang, Y.; Cao, Y.
  • An empirical study on the risk spillover effect of shadow banking based on dynamic Copula-CoVaR models
    Wang, S.; Li, Z.
  • Risk contagion in multilayer network of financial markets
    Wang, H.; Li, S.
  • Financial frictions, monetary policy transmission, and systemic financial risks
    Wang, Y.; Wang, J.
  • Asset management, shadow banking system and monetary policy transmission
    Wen, X.; Su, N.
  • Effects of shadow banking on bank risks from the view of capital adequacy
    Wu, M.; Shen, C.
  • The effect of monetary policy on shadow banking risk-taking
    Xiao, Q.; Deng, S.
  • Linkage of international stock market and financial infection analysis based on c-D-Copula model
    Ye, W.; Dong, X.; Miao, B.
  • Risk acceptance of small and medium-sized commercial banks in shadow bank business: transmission mechanism and empirical research
    Zhou, X.