Sectoral similarity of banks’ business loans and its negative externality in China

IF 4.8 2区经济学 Q1 BUSINESS, FINANCE

Pacific-Basin Finance Journal Pub Date : 2025-02-17 DOI:10.1016/j.pacfin.2025.102705

Guan Yan , Stefan Trück , Zhidong Liu , Hongwei Gao

{"title":"Sectoral similarity of banks’ business loans and its negative externality in China","authors":"Guan Yan , Stefan Trück , Zhidong Liu , Hongwei Gao","doi":"10.1016/j.pacfin.2025.102705","DOIUrl":null,"url":null,"abstract":"<div><div>We analyse the sectoral similarity of banks’ business loans and seek implications for this indirect interconnectedness as a contagion channel of systemic risk. Based on sectoral structures of commercial banks’ business loans in China from 2009 to 2022, we show increased sectoral similarity after China’s economic stimulus in 2008 and during the COVID-19 lockdown. Employing QAP correlations, we also find loan similarity is associated with the differences in bank locations and several financial indicators. The relationships between business loan similarity and banks’ risk profiles are investigated in panel regressions. We find that loan similarity is negatively related to individual risks and systemic vulnerability. It also leads to higher contribution to systemic risk by delevering pressure and fire-sale spillovers, providing evidence on a negative externality. The dynamics of the negative externality of loan similarity are also examined. To the best of our knowledge, it is the first study to provide a thorough analysis on the sectoral similarity of commercial banks’ business loans in the Chinese context.</div></div>","PeriodicalId":48074,"journal":{"name":"Pacific-Basin Finance Journal","volume":"91 ","pages":"Article 102705"},"PeriodicalIF":4.8000,"publicationDate":"2025-02-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Pacific-Basin Finance Journal","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0927538X25000423","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}

引用次数: 0

Abstract

We analyse the sectoral similarity of banks’ business loans and seek implications for this indirect interconnectedness as a contagion channel of systemic risk. Based on sectoral structures of commercial banks’ business loans in China from 2009 to 2022, we show increased sectoral similarity after China’s economic stimulus in 2008 and during the COVID-19 lockdown. Employing QAP correlations, we also find loan similarity is associated with the differences in bank locations and several financial indicators. The relationships between business loan similarity and banks’ risk profiles are investigated in panel regressions. We find that loan similarity is negatively related to individual risks and systemic vulnerability. It also leads to higher contribution to systemic risk by delevering pressure and fire-sale spillovers, providing evidence on a negative externality. The dynamics of the negative externality of loan similarity are also examined. To the best of our knowledge, it is the first study to provide a thorough analysis on the sectoral similarity of commercial banks’ business loans in the Chinese context.

查看原文本刊更多论文

求助全文

约1分钟内获得全文求助全文

来源期刊

Pacific-Basin Finance Journal BUSINESS, FINANCE-

CiteScore

6.80

自引率

6.50%

发文量

157

期刊介绍： The Pacific-Basin Finance Journal is aimed at providing a specialized forum for the publication of academic research on capital markets of the Asia-Pacific countries. Primary emphasis will be placed on the highest quality empirical and theoretical research in the following areas: • Market Micro-structure; • Investment and Portfolio Management; • Theories of Market Equilibrium; • Valuation of Financial and Real Assets; • Behavior of Asset Prices in Financial Sectors; • Normative Theory of Financial Management; • Capital Markets of Development; • Market Mechanisms.