Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/260274 
Year of Publication: 
2019
Series/Report no.: 
Working Paper No. 2019:4
Publisher: 
Lund University, School of Economics and Management, Department of Economics, Lund
Abstract: 
We suggest that banks contribute extensively to systemic risk only if they are both "risky" and centrally placed in the financial network. To calculate systemic risk we apply the CoVaR measure of Adrian and Brunnermeier (2016) and measure centrality using detailed US loan syndication data. In agreement with our conjecture our main finding is that centrality is an important determinant of systemic risk but primarily not by its direct effect. Rather, its main influence is to make other firm specific risk measures more important for highly connected banks. A bank's contribution to systemic risk from a fixed level of Value-at-Risk is about four times higher for a bank with two standard deviations above average centrality compared to a bank with average network centrality. Neglecting this indirect moderation effect of centrality severely underestimates the importance of centrality for "risky" banks and overestimates the effect for "safer" banks.
Subjects: 
systemic risk
network centrality
loan syndication
CoVaR
JEL: 
G18
G21
Document Type: 
Working Paper

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