Systemic Risk Spillovers Across Chinese Energy Companies : Evidence from a Tail-Event Driven Network Analysis

Using the Tail-Event driven NETwork (TENET) framework, which analyses tail events and network dynamics, we create an extreme risk spillover network comprising 80 energy companies in coal, oil, natural gas, and new energy. To study risk channels and the relative role of each subsector or company in the whole systemic network, we assess overall, subsector, and company-level connectedness. The Sino-US trade war in 2018 and the COVID-19 outbreak in 2020 boosted overall connectedness and concentration. The coal subsector is most integrated and most exposed to systemic risk. Common shareholders, upstream and downstream industrial chain links, geographical proximity, and business overlap and competition cause systemic risk spillovers at the company level. Systemic risk spillovers are asymmetric under different market conditions, reflecting the asymmetric pattern of positive and negative information transmission. This research may provide policy implications for governments, regulators and energy companies in emerging economies where coal is the dominant energy source