State ownership and zombie firms: Evidence from China's 2008 stimulus plan

Abstract

Whether and how are zombie firms associated with a crisis‐rescue plan? We examine this issue through the channel of state‐owned enterprises (SOEs). We find that, after China's 2008 stimulus plan, a firm in the city with a high SOE share is more likely to become a zombie firm. This result may be driven by the fact that government‐led investment, through SOEs, tends to focus more on employment‐related projects than efficient ones, particularly during the crisis period. Resource misallocation associated with the crisis‐rescue plan may cause production inefficiency, which leads to the emergence of zombie firms.

The impact of mixed-ownership reform on zombie firms: Evidence from Chinese listed SOEs

“…Given this, will the heterogeneous shareholder equity integration and resource integration brought about by mixed-ownership reform help clear out zombie firms? As a developing country in transition, China’s SOEs play a crucial role in economic development, but at the same time, the risk of evolving into zombie firms is also higher [ 67 ]. Based on this, this article takes Chinese listed SOEs as the object and confirms the positive impact of mixed ownership reform on reducing the risk of zombification in SOEs, thus offering valuable theoretical insights into clear out zombie firms.…”

Zombie firms, misallocation and manufacturing capacity utilization rate: Evidence from China

“…Cai et al (2022) investigate the relationship between government fiscal stress and the formation of zombie firms in China and find that the possibility of the formation of zombie firms significantly decreases after the province-managing-county reform. Recently, Li et al (2023) study the relationship between the 2008 stimulus package and the emergence of zombie firms in China, and demonstrate that the 4 trillion stimulus package significantly increases the likelihood that firms in cities with a high share of state owned enterprises (SOEs) become zombie firms. Moreover, studies based on Chinese firm level data also find that factors such as protect employment, firms' comparative advantage, biased allocation of state-owned enterprises' funds and resource-based industry dependence are the main reasons for the formation of zombie firms in China (He & Zhu, 2016;Shao et al, 2021;Shen, 2016;Zhong et al, 2016).…”