How Can FinTech Reduce Corporate Zombification Risk?

Can common institutional ownership inhibit the formation of zombie firms? Evidence from China

“…Yet, the disposal method is still imperfect, and there are many practical dilemmas and governance difficulties, such as undue government intervention, obstacles to the implementation of policies, the lack of market‐based disposal institutions, and the imperfection of social supporting policies (He et al, 2020; He et al, 2023). There is an existing fruitful literature on zombie firm governance, such as environmental regulation (Du and Li, 2018), administrative reform (Fan et al, 2023), development of FinTech (Jin et al, 2022), and so forth. However, there is a lack of extant literature on exploring the governance mechanisms of zombie firms from the perspective of ownership structure.…”

“…Zombie firms carry severe economic and social risks, and have become an important obstacle to long-term economic growth and high-quality development (McGowan et al, 2019;Carreira et al, 2021). In the Chinese context, with the deepening of the supply-side structural reform, China has achieved initial results in the elimination of zombie firms (Jin et al, 2022). Yet, the disposal method is still imperfect, and there are many practical dilemmas and governance difficulties, such as undue government intervention, obstacles to the implementation of policies, the lack of market-based disposal institutions, and the imperfection of social supporting policies (He et al, 2020;He et al, 2023).…”

“…Fan et al (2023) find that lowering entry barriers by reducing government intervention and breaking administrative monopolies can facilitate the disposal of zombie firms and stimulate entrepreneurship. At the external environment level, Jin et al (2022) suggest that Fintech can not only improve the efficiency of bank credit and government subsidies, thus reducing the risk of corporate zombification, but also curb the contagious effects of zombie firms in the industry. Lin and Zhang (2023) point out that resolving the risk of corporate zombification is a pain point in the transformation of old and new momentum, as well as the difficulty of economic transformation and upgrading, while investor attention can effectively reduce the risk of enterprises transforming into zombie firms.…”

“…Government policies include fiscal stress (Cai et al, 2022), environmental regulation (Du and Li, 2018), administrative reform (Fan et al, 2023), and trade facilitation (Li, Hu, et al, 2021; Li, Wang, et al, 2021), and so forth. The external environment level includes the development of FinTech (Jin et al, 2022), investor attention (Lin and Zhang, 2023), and fierce bank competition (Zhang and Huang, 2022), and so forth. The enterprise's efforts include downsizing and restructuring (Carreira et al, 2021), increasing the proportion of female executives (Fang et al, 2020), and improving pay‐performance sensitivity (Wu and Pan, 2021), and so forth.…”

Surviving beyond expiry: a systematic literature review of zombie firms

“…Shao et al (2023) provide evidence that zombie firms depress innovation; hence, governments must be aware of this while extending subsidized credit to them. Financial technology (FinTech) has proven to be useful in reducing information asymmetry for targeted financial assistance, optimizing banks' risk assessment mechanisms, and mitigating market distortion to provide a synergistic effect, leading to overall improvement (Jin, Pan, Li, & Liu, 2022). It has also been observed that the strong competition among banks can reduce zombie formation because banks will have to focus more on due diligence and find highly credit-worthy borrowers (Zhang & Huang, 2022).…”