Can Government Funding Revive Zombie Enterprises? Evidence From Listed Chinese Manufacturing Enterprises

Yang, Yudi; Yong, Qi Long; Yang, Shuo

doi:10.3846/jbem.2021.15334

Cited by 8 publications

(10 citation statements)

References 24 publications

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“…SOE managerial behaviour and career prospects are primarily driven by how well SOE executives comply with governmental directions to meet the goals of the state (Du, 2014). Equally, studies have highlighted that when financial performance and political matters conflict, the executives of Chinese SOEs will select state interests over financial interests and the interests of other non-state stakeholders (Conyon and He, 2008; Yang et al, 2012) such as other countries.…”

Section: Resultsmentioning

confidence: 99%

The impact of Chinese foreign direct investment on host country economic growth

Ross

Fleming

2022

Local Economy: The Journal of the Local Economy Policy Unit

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Employing an institutional – FDI – economic growth lens the purpose of this paper is to identify and explain the impacts of Chinese FDI (CFDI) on host countries’ economic growth. While extensive research has been undertaken regarding determinants of CFDI, little is known about the actual outcomes of CFDI in recipient countries. Based on a sample of 22 countries over the period 2003–2018, our results identify that while general flows of FDI exhibited positive impacts on host countries’ economic growth, CFDI had a negative effect on host country economic growth. From the host country perspective, given the emphasis that is placed on FDI as an instrument of growth and development, our findings raise questions about what host countries are actually gaining from CFDI and the potential implications of whether pursuing the ‘Beijing Consensus’ as opposed to the ‘Washington Consensus’ is really in the long-term interests of countries.

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Section: Resultsmentioning

confidence: 99%

The impact of Chinese foreign direct investment on host country economic growth

Ross

Fleming

2022

Local Economy: The Journal of the Local Economy Policy Unit

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“…First, this paper contributes to the emerging literature on zombie enterprise disposal. The fundamental assertion in zombie enterprise disposal literature is that firm restructuring (Carreira et al, 2022 ; Fukuda & Nakamura, 2011 ), government funding (Yang et al, 2021 ), and bankruptcy system reform (Nieto-Carrillo et al, 2022 ) are critical. However, existing studies ignore the root cause of zombie enterprises: government intervention, which has led to a big gap in research on how to efficiently dispose of zombie enterprises.…”

Section: Discussionmentioning

confidence: 99%

“…McGowan and Andrews ( 2018 ) argue that efficient bankruptcy regimes can enhance market selection and promote zombie enterprises’ bankruptcy. Yang et al ( 2021 ) find that government innovation funding revives zombie enterprises by improving innovation through sharing innovation costs and encouraging firm downsizing. This paper contends that administrative reforms stimulate a virtuous circle between competition, innovation, and productivity growth, which resurrects zombie enterprises.…”

Section: Discussionmentioning

confidence: 99%

“…Existing studies attribute the persistence of zombie enterprises to banks’ efforts to cover up bad debt losses (Caballero et al, 2008 ) and government pressures, such as job preservation (Jaskowski, 2015 ), a weak rule of law (McGowan et al, 2017b ), and inappropriate government bailouts of firms (Hoshi et al, 2023 ). Therefore, corporate restructuring (Carreira et al, 2022 ; Fukuda & Nakamura, 2011 ), particularly downsizing in zombie enterprises and corporate fixed asset sales, and government funding for production and innovation subsidies (Yang et al, 2021 ) are essential to eradicate zombie enterprises.…”

Section: Theoretical Backgroundmentioning

confidence: 99%

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Administrative reform and the disposal of zombie enterprises: evidence from China

2023

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The study investigates the effects of drastic institutional changes on the reduction of zombie enterprises in China and the underlying mechanisms of this relationship. We employed data from the ASIF from 1998 to 2007 and adapted the difference-in-difference approach to analyze the effects based on China’s investment approval system reform. We find that the reform can reduce the proportion of zombie enterprises by 13.3%. This result is driven by competition and scale effects. The former reduces institutional transaction costs by 12.8% and increases innovation capacity by 6.1%. The latter significantly improves the total factor productivity of enterprises; the reform promoted the expansion of enterprise size by 7.1% and the enhancement of market accommodation capacity by 13.2%. The reform had a weak effect on state-owned and non-competitive industrial zombie enterprises. This paper contributes to debates concerning the effect of institutions on entrepreneurship and the disposal of small zombie enterprises.

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“…As documented by Geng et al (2021), a 1% increase in zombie firms' assets decreases industrial upgradation by 0.85%. The unavailability of capital with zombie firms leads to a reduction in innovative capabilities (Yang, Qi, & Yang, 2021). Qiao and Fei (2022) document the negative effects of government subsidies to zombies on innovation.…”

Section: Zombie Formationmentioning

confidence: 99%

Surviving beyond expiry: a systematic literature review of zombie firms

Upadhyay,

Baag

2023

CAFR

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PurposeThis paper reviews the literature on zombie firms to provide a holistic view by delineating their formation, impact, widespread nature, prevention and policy implications.Design/methodology/approachThis paper uses a systematic literature review methodology, in which 76 papers published in journals ranked on the Australian Business Deans Council (ABDC) 2022 list were reviewed. The study period was from 2000 to 2022.FindingsAmong the main findings, the widespread problems of zombie firms were evident. The authors found that consistent support, either in the form of government grants or a weak financial framework, was responsible for their formation. The suboptimal performance of factors of production, depressed job creation, low innovation and overall negative impact on economic activity are the consequences of zombification. This can be controlled by ensuring better bankruptcy codes, focused on government assistance, technology use and better due diligence by banks.Practical implicationsThis review serves as a reference point for future researchers as a cohesive and holistic study presenting a full picture of the problem, so that the proposed solutions are robust and tenable.Originality/valueThis review is among the initial attempts to comprehensively study published work on zombie firms in terms of analyzing their region-specific nature, with an emphasis on definition, causes, impact and prevention.

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Can Government Funding Revive Zombie Enterprises? Evidence From Listed Chinese Manufacturing Enterprises

Cited by 8 publications

References 24 publications

The impact of Chinese foreign direct investment on host country economic growth

The impact of Chinese foreign direct investment on host country economic growth

Administrative reform and the disposal of zombie enterprises: evidence from China

Surviving beyond expiry: a systematic literature review of zombie firms

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