Industrial financialization and cross-sectoral risk contagion: A capital flow perspective

Huang Z., Chen S., Su Y., ŞAHİN S.

Finance Research Letters, vol.86, 2025 (SSCI, Scopus) identifier identifier

  • Publication Type: Article / Article
  • Volume: 86
  • Publication Date: 2025
  • Doi Number: 10.1016/j.frl.2025.108644
  • Journal Name: Finance Research Letters
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, ABI/INFORM
  • Keywords: Capital flow, Industrial financialization, Network model, Perturbation method, Risk contagion
  • Yıldız Technical University Affiliated: Yes

Abstract

In this paper, we investigate how industrial financialization reshapes cross-sectoral risk contagion from a capital flow perspective. Cross-sectoral risk contagion networks are constructed, and a novel technique, the control perturbation method, is developed to formulate the cross-sectoral risk contagion patterns induced by the financialization of the industrial sector. The empirical analysis reveals that the financialization of the industrial sector systematically amplifies cross-sectoral risk contagion, ultimately inducing ergodic risk propagation dynamics across the economic system.