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Impact of COVID-19 on the contagion effect of risks in the banking industry: based on transfer entropy and social network analysis method

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  • Wang Yijun

    (Xi ‘an University of Architecture and Technology)

  • Zhang Yu

    (Xi ‘an University of Architecture and Technology)

  • Usman Bashir

    (University of Bahrain)

Abstract

Based on the daily stock closing price data of 14 A-share listed banks in China from January 2009 to June 2021, this paper makes a comparative analysis of the contagion effect of risks in the banking industry before and after the outbreak of COVID-19. Based on the transfer entropy method, this paper calculates the correlation network matrix of inter-bank risk contagion effect and empirically studies the contagion effect of risks in the banking industry before and after the outbreak by using social network analysis method, depicting the network structure of systemic risk contagion in Chinese banking industry. This study found that the risk of inter-bank system increased significantly after the outbreak and the key nodes of bank risk contagion have also changed before and after the outbreak; state-owned banks are less risky, joint-stock banks and local financial institutions are riskier, and the contagion effect of risks between banks is asymmetric.

Suggested Citation

  • Wang Yijun & Zhang Yu & Usman Bashir, 2023. "Impact of COVID-19 on the contagion effect of risks in the banking industry: based on transfer entropy and social network analysis method," Risk Management, Palgrave Macmillan, vol. 25(2), pages 1-41, June.
    • Handle: RePEc:pal:risman:v:25:y:2023:i:2:d:10.1057_s41283-023-00117-1
    DOI: 10.1057/s41283-023-00117-1
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    References listed on IDEAS

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