It is an essential task for China's financial sector to prevent and defuse financial risks, particularly systemic financial risks. As funds accelerate their investment deployment within financial institutions and their investment scale continues to rise, their role and standing as shareholders within corporate governance structures has steadily increased. In light of this, this paper constructs a fund holding network among financial institutions based on data from listed financial institutions between 2013 and 2024, and empirically analyses the impact of this network on systemic financial risk and its potential underlying mechanisms. The results show that fund holding network among financial institutions significantly exacerbate systemic financial risk. Convergence in financial institution governance, synchronised share prices, and asset homogeneity constitute key mechanisms through which fund holding network influence systemic financial risk. Meanwhile, financial institutions can mitigate systemic financial risk by improving their governance standards and enhancing the quality of information disclosure. For the regulatory authorities, limiting or reducing the concentration of fund holdings in financial institutions can lessen the impact of fund holding network on systemic financial risk. This study confirms the mechanism through which fund shareholding networks influence systemic risk in financial institutions, providing new insights and empirical support for reducing systemic financial risk by strengthening corporate governance within financial institutions, improving the quality of information disclosure, and enhancing supervision over fund shareholdings. • A fund holding network is constructed to map and quantify the channel of systemic risk contagion among financial institutions. • Financial institutions with higher centrality in the fund holding network have greater influence on systemic risk. • The fund holding network amplifies systemic risk by triggering governance convergence, stock price synchronicity, and asset structure homogenization among held institutions. • Enhanced internal governance and information disclosure can mitigate this risk, while high fund ownership concentration aggravates it.
Jia et al. (Sun,) studied this question.