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Systemic risk in financial institutions of BRICS: measurement and identification of firm-specific determinants

Author

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  • Shumaila Zeb

    (Shaheed Zulfikar Ali Bhutto Institute of Science and Technology)

  • Abdul Rashid

    (International Islamic University)

Abstract

The aim of this paper is twofold. First, it measures the systemic risk contribution of banks, financial services, and insurance firms of each of BRICS member country for the period 2000–2015. Second, it empirically examines how firm-specific factors determine systemic risk in financial institutions of BRICS countries. To carry out the empirical analysis, the unbalanced firm-level data are used. To gauge the systemic risk of banks, financial services, and insurance firms, the Delta Conditional Value-at-Risk (∆CoVaR) methodology is applied. The panel regression approach is used to examine how firm-specific variables determine the level of systemic risk in different financial institutions of BRICS countries. The empirical findings suggest that the size of institution, the tier 1 ratio, the liquidity ratio, the operating profit margin ratio, and the market-to-book value ratio statistically significantly determine systemic risk in BRICS countries. The results are significant in devising financial regulations to decrease the influence of systemic risk factors in the respective economies.

Suggested Citation

  • Shumaila Zeb & Abdul Rashid, 2019. "Systemic risk in financial institutions of BRICS: measurement and identification of firm-specific determinants," Risk Management, Palgrave Macmillan, vol. 21(4), pages 243-264, December.
    • Handle: RePEc:pal:risman:v:21:y:2019:i:4:d:10.1057_s41283-018-00048-2
    DOI: 10.1057/s41283-018-00048-2
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    3. Xu, Qifa & Jin, Bei & Jiang, Cuixia, 2021. "Measuring systemic risk of the Chinese banking industry: A wavelet-based quantile regression approach," The North American Journal of Economics and Finance, Elsevier, vol. 55(C).

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    More about this item

    Keywords

    Systemic risk; Value-at-risk; Conditional value-at-risk; Quantile regression; Financial sector; BRICS;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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