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Entropy 2018, 20(10), 792; https://doi.org/10.3390/e20100792

Identifying Systemically Important Companies by Using the Credit Network of an Entire Nation

1
International Institute for Applied Systems Analysis, Schlossplatz 1, 2361 Laxenburg, Austria
2
Complexity Science Hub Vienna, Josefstädter Straße 39, 1080 Vienna, Austria
3
Section for Science of Complex Systems, Medical University of Vienna, Spitalgasse 23, 1090 Vienna, Austria
4
Santa Fe Institute, 1399 Hyde Park Road, Santa Fe, NM 87501, USA
*
Author to whom correspondence should be addressed.
Received: 27 July 2018 / Revised: 8 October 2018 / Accepted: 8 October 2018 / Published: 16 October 2018
(This article belongs to the Special Issue Economic Fitness and Complexity)
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Abstract

The notions of systemic importance and systemic risk of financial institutions are closely related to the topology of financial liability networks. In this work, we reconstruct and analyze the financial liability network of an entire economy using data of 50,159 firms and banks. Our analysis contains 80.2% of the total liabilities of firms towards banks and all interbank liabilities in the Austrian banking system. The combination of firm-bank networks and interbank networks allows us to extend the concept of systemic risk to the real economy. In particular, the systemic importance of individual companies can be assessed, and for the first time, the financial ties between the financial and the real economy become explicitly visible. We find that firms contribute to systemic risk in similar ways as banks do. We identify a set of mid-sized companies that carry substantial systemic risk. Their default would affect up to 40% of the Austrian financial market. We find that all firms together create more systemic risk than the entire financial sector. In 2008, the total systemic risk of the Austrian interbank network amounted to only 29% of the total systemic risk of the entire financial network consisting of firms and banks. The work demonstrates that the notions of systemically important financial institutions (SIFIs) can be directly extended to firms. View Full-Text
Keywords: credit network; systemic importance; bank-firm network; interbank network; systemic risk; financial regulation; contagion credit network; systemic importance; bank-firm network; interbank network; systemic risk; financial regulation; contagion
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Poledna, S.; Hinteregger, A.; Thurner, S. Identifying Systemically Important Companies by Using the Credit Network of an Entire Nation. Entropy 2018, 20, 792.

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