Can corporate financing through the stock market create systemic risk? Evidence from the BRVM securities market*

This paper investigates the systemic risk in the West African Economic and Monetary Union (WAEMU) stock exchange (Bourse Re ' gionale des Valeurs Mobilie`res - BRVM). It examines the extent to which growing activities in this stock market generate systemic risk. We find strong linkages across all economic sectors of listed firms, with the financial and industrial sectors being the center of the system around which the other sectors revolve. Financial institutions are not the only source of systemic risk in the WAEMU region, even though they play an important role in the system. Finally, using panel regressions, we find that big, high-growth and profitable firms contribute more to systemic risk than others. Overall, we find that the determinants of systemic risk depend on the indicator used to assess it and the sectors in which companies operate.