The role of media coverage in measuring the systemic risk of Chinese financial institutions

This paper examines the impact of media coverage on systemic risk spillover in the Chinese market based on a tail event-driven network. By calculating the nonlinear conditional value at risk (CoVaR) through a tail-event driven network of Chinese financial institutions, we find that the CoVaR that considers media coverage has more accurate validity. When media coverage is high, the overall risk of the financial sector shifts. Compared with four different sectors, other financial institutions have the highest average risk inputs and outputs while the banking sector is the most robust. To provide further evidence, we analyse the spillover channels in times of crisis. We find that increased coverage can reduce the risk exposure within the system. We also find positive media have a lower level of systemic risk than negative media coverage in the sample period. We calculated the systemic risk exposure to illustrate the Systemically Important Financial Institutions (SIFIs) based on systemic risk emitters and receivers. The results are consistent with the Global Systemically Important Financial Institutions (G-SIFIs) and are broadly consistent with the media coverage results.