Systemic risk spillovers of nonfinancial firms: Does bank liquidity hoarding matter? Evidence from China

Given the strong interdependencies between the economic and financial systems, nonfinancial firms have a significant impact on systemic risk. In this scenario, we examine the influence of bank liquidity hoarding on risk spillovers of nonfinancial firms, as it can impact firms' financing environment and operational conditions. Using data from 118 publicly listed Chinese companies between 2008 and 2021, we find that bank liquidity hoarding increases nonfinancial firms' risk spillovers, especially in the manufacturing and real estate industries. Furthermore, the path analysis results show that bank liquidity hoarding exacerbates extreme risk spillovers by increasing financing costs and intensifying corporate maturity mismatches. Moreover, the effect of bank liquidity hoarding is mitigated in firms with higher profitability and lower corporate financialization. This research bolsters the efficacy of macroprudential policies aimed at managing systemic risks amplified by bank liquidity hoarding within the financial and economic systems.