Document Type : Research Article
Authors
1 Department of Financial Management and Insurance, Faculty of Management, University of Tehran, Tehran, Iran.
2 Master of Financial Engineering, Department of Financial Management and Insurance, Faculty of Management, University of Tehran, Iran.
Abstract
This research has three main goals. The first goal is to investigate the contagion of the risk from the financial sector to other industries. The second objective is to examine the impact of the competitiveness of industries on the spread of the risk sequence from the financial sector to the industries, and the third objective is to examine the effect of three main industrial indicators, namely, net debt, value spread and investment spread, on the risk contagion from the financial sector to other industries. In this research, a new measurement method of the spillover of the risk sequence from the financial sector to other industries has been introduced as the occurrence of similar conditions, which for each industry in each period is equal to the number of simultaneous occurrences of severe negative returns in that industry and the financial sector. Empirical findings show that the contagion of the risk from the financial sector to other industries was significant and this contagion was greater for competitive industries due to the greater need for external financing. The occurrence of similar conditions in each sector has a positive relationship with the net debt of that industry. Also, there is no relationship between the value spread and the investment spread with the occurrence of similar conditions.
Keywords
contagion. Journal of Banking & Finance,50(2015), 411-427.
[2] Diebold, F. X., & Yilmaz, K. Better to give than to receive: Predictive directional measurement of volatility spillovers. International Journal of forecasting,28(1)(2012), 57-66.
[3] Kroszner, R. S., Laeven, L., & Klingebiel, D. Banking crises, financial dependence, and
growth. Journal of financial Economics,84(1)(2007), 187-228.
[4] Hoberg, G., & Phillips, G. Real and financial industry booms and busts. The Journal of
Finance,65(1)(2010), 45-86.
[5] Hou, K., & Robinson, D. T. Industry concentration and average stock returns.The Journal
of Finance,61(4) (2006), 1927-1956.
[6] Valta, P. Competition and the cost of debt. Journal of Financial Economics,105(3)(2012),
661-682.
[7] Houston, J. F., & Stiroh, K. J. Three decades of financial sector risk. FRB of New York
Staff Report(2006), (248).
[8] Wang, Z. Dynamics and causality in industry-specific volatility. Journal of Banking & Finance34(7) (2010), 1688-1699.
[9] Cheong, C. S., Olshansky, A., & Zurbruegg, R. The influence of real estate risk on
market volatility. Journal of Property Investment & Finance(2011).
[10] Baur, D. G. Financial contagion and the real economy. Journal of banking & finance,36(10)(2012), 2680-2692.
[11] Campello, M., Graham, J. R., & Harvey, C. R. The real effects of financial constraints:
Evidence from a financial crisis. Journal of financial Economics,97(3)(2010), 470-487.
[12] Bae, K. H., Karolyi, G. A., & Stulz, R. M. A new approach to measuring financial
contagion. The Review of Financial Studies,16(3)(2003), 717-763.
[13] Hartman, P., Straetmans, S., & Vries, C. D. Asset market linkages in crisis periods.
Review of Economics and Statistics,86(1)(2004), 313-326.
[14] Christiansen, C., & Ranaldo, A. Extreme coexceedances in new EU member states’ stock
markets. Journal of banking & finance,33(6)(2009), 1048-1057.
[15] Beine, M., Cosma, A., & Vermeulen, R. The dark side of global integration: Increasing
tail dependence. Journal of Banking & Finance,34(1)(2010), 184-192.
[16] Fry, R., Martin, V. L., & Tang, C. A new class of tests of contagion with applications.
Journal of Business & Economic Statistics,28(3)(2010), 423-437.
[17] Jing, Z., Liu, Z., Qi, L., & Zhang, X. Spillover effects of banking systemic risk on firms
in China: A financial cycle analysis. International Review of Financial Analysis,82(2022),
102171.
[18] Rajan, R., & Zingales, L. Financial development and growth. American Economic Review,88(3)(1998), 559-586.
[19] Ortiz-Molina, H., & Phillips, G. M. Real asset illiquidity and the cost of capital. Journal
of Financial and Quantitative Analysis,49(1)(2014), 1-32.
[20] Fama, E. F., & French, K. R. Size and booktomarket factors in earnings and returns. The
journal of finance,50(1)(1995), 131-155.
[21] Chen, N. F., & Zhang, F. Risk and return of value stocks. The Journal of Business,71(4)
(1998), 501-535.
[22] Fallah Shams, M., & Banisharif, A. Investigating the Financial Risk Spillover in Banks
Accepted in Tehran Stock Exchange Market through MGARCH Approach. Financial Research
Journal,23(1)(2021), 87-107.
[23] Keshavarz, G., & Noftakhar Daryaee, K. Returns and Volatility Spillover Effects on
the Estimated VaR of Gold and Exchange Rate Portfolio. Journal of Economic Research
(Tahghighat- E- Eghtesadi),53(1)(2018), 117-152.
[24] Seraj, M., Tehrani, R., & Fallahpour, S. Evaluation of the Effect of Contagion Risk on
the Macroeconomic Performance of Iran and Identifying Too-Connected-To-Fail (TCTF)
Banks. The Journal of Economic Studies and Policies,7(1)(2020), 153-175.
[25] Ansari Samani, H., and Heydarpoor, H. Investigation the financial risk contagion between
Iran and selected financial partners. Journal of Econometric Modelling,4 (1)(2019), 93-119.
[26] Bazrayi, M., Ghavidel, S., & Emamverdi, G. Identification of Contagion Path of currency
Crises in Industries of Tehran Stock Exchange. Economical Modeling,15(53)(2021), 73-96.
[27] Pastor, L’., & Pietro, V. ´ Stock valuation and learning about profitability. The Journal of
Finance,58(5)(2003), 1749-1789.
[28] Bradley, M., Jarrell, G. A., & Kim, E. H. On the existence of an optimal capital structure: Theory and evidence. The journal of Finance,39(3) (1984), 857-878.
[29] MacKay, P., & Phillips, G. M. How does industry affect firm financial structure?. The
review of financial studies,18(4) (2005), 1433-1466.
[30] Beck, T., & Levine, R. Industry growth and capital allocation: does having a market-or
bank-based system matter?. Journal of financial economics,64(2)(2002), 147-180.
[31] Beck, T., & Levine, R. (2004). Stock markets, banks, and growth: Panel evidence. Journal
of Banking & Finance,28(3), 423-442.
[32] Beck, T., Levine, R., & Loayza, N. Finance and the Sources of Growth. Journal of financial
economics,58(1-2)(2000), 261-300.
[33] Cetorelli, N., & Gambera, M. Banking market structure, financial dependence and growth:
International evidence from industry data. The Journal of Finance,56(2) (2001), 617-648.
[34] Chava, S., & Purnanandam, A. The effect of banking crisis on bank-dependent borrowers.
Journal of financial economics,99(1) (2011), 116-135.
[35] Claessens, S., & Laeven, L. . Financial dependence, banking sector competition, and economic growth. Journal of the European Economic Association,3(1) (2005), 179-207.
[36] Cole, R. A., Moshirian, F., & Wu, Q. Bank stock returns and economic growth. Journal
of Banking & Finance,32(6) (2008), 995-1007.
[37] Dell’Ariccia, G., Detragiache, E., & Rajan, R. The real effect of banking crises. Journal
of Financial Intermediation,17(1) (2008), 89-112.
[38] Ghosal, V., & Loungani, P. . Product market competition and the impact of price uncertainty on investment: Some evidence from US manufacturing industries. The Journal of
industrial economics (1996), 217-228.
[39] Hoggarth, G., Reis, R., & Saporta, V. Costs of banking system instability: some empirical
evidence. Journal of Banking & Finance,26(5) (2002), 825-855.
[40] Levine, R. Finance and growth: theory and evidence. Handbook of economic growth,1 (2005),
865-934.
[41] Liu, Y. A., & Pan, M. S. Mean and volatility spillover effects in the US and Pacific-Basin
stock markets. Multinational Finance Journal,1(1) (1997), 47-62.
[42] Merton, R. C. On the pricing of corporate debt: The risk structure of interest rates. The
Journal of finance,29(2) (1974), 449-470.
[43] Santos, S. J., & Tenreyro, S. (2006). The log of gravity.
[44] Vives, X. Competition in the changing world of banking. Oxford review of economic policy,17(4)(2001), 535-547.
)