The crowding-out effect of zombie companies on fixed asset investment: Evidence from China

Ren, Meixu; Zhao, Jingmei; Zhao, Jinxuan

doi:10.1016/j.ribaf.2023.101979

Cited by 7 publications

(3 citation statements)

References 53 publications

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“…The painful problem of being 'stiff but not dead' has made zombie firms a major persistent problem in social and economic development (Du and Li, 2018), causing severe harm to the overall economic and social development (Fan et al, 2023). The long-term nature of 'bloodsucking' and dependence on zombie firms not only seriously crowd out valuable physical and credit resources but also squeeze out healthy peers and result in the phenomenon of the 'bad money drives out good' (Ren et al, 2023). Feng et al (2022) suggest that zombie firms may increase the cost of debt financing for non-zombie firms and prompt the latter to rely more on internal funds.…”

Section: Zombie Firmsmentioning

confidence: 99%

“…This paper argues that, to some extent, preventing the formation of zombie firms should be given more emphasis than the treatment of zombie firms. Preventing the formation of zombie firms is conducive to releasing economic resources, revitalising the market and upgrading industries (Shen and Chen, 2017;Ren et al, 2023). As a matter of fact, the state level has gradually noticed the harm of zombie firms.…”

Section: Practical Implicationsmentioning

confidence: 99%

“…Moreover, in addition to the above economic negative externalities, some studies have shown that zombie firms also have significant environmental negative externalities on normal firms (Feng et al, 2022;Qiao et al, 2022), exacerbating the level of their pollution emissions, which is not conducive to the synergistic promotion of high-quality development and environmental protection (Han et al, 2019;Yu et al, 2021). One of the structural problems of China's real economy is the existence of zombie firms in the manufacturing industry (Guo et al, 2022;Ren et al, 2023). With continued assistance from the government and banks, zombie firms have had difficulty exiting the market (Zhu et al, 2019), accumulating a large amount of backward production capacity and squeezing market space, which has become a long-standing problem plaguing China's economic development (Shao et al, 2022).…”

Section: Introductionmentioning

confidence: 99%

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

Ding

2024

Asian-Pac Economic Lit

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The survival of zombie firms severely crowds out healthy corporate investment and employment growth, eventually undermining economic growth potential. Hence, how to properly address the problem of corporate zombification is an essential part of achieving high‐quality economic development in China. In recent years, the phenomenon of common institutional ownership has become increasingly widespread in the capital markets and has a significant impact on the strategic decisions of companies. There are currently two views on the corporate governance role of common institutional ownership: the synergistic governance effect and the collusive fraud effect. Using data from Chinese‐listed firms from 2009 to 2021, this paper finds that common institutional ownership can significantly inhibit the formation of zombie firms. The higher the degree of their linkage and the greater the shareholding, the more pronounced the synergistic effect. The findings remained valid after considering the endogeneity issue and conducting robustness tests. Furthermore, the mechanism test suggests that common institutional ownership inhibits the formation of zombie firms by improving internal control quality and reducing agency costs. This paper contributes to the study of how to inhibit the formation of zombie firms by identifying common institutional ownership from the perspective of external governance mechanisms. In addition, this paper enriches the research on the economic consequences of common institutional ownership. Finally, various practical implications for policymakers may be realised, which may help curb the trend of corporate zombification through equity‐based instruments.

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Section: Zombie Firmsmentioning

confidence: 99%

Section: Practical Implicationsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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

Ding

2024

Asian-Pac Economic Lit

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Zombie firms: a systematic review and future research directions

Shome,

Verma

2024

Manag Rev Q

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Public management of digitalization into the Spanish tourism services: a heterodox analysis

Sánchez-Bayón,

Sastre,

Sánchez

2024

Rev Manag Sci

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This study is a critical review of public intervention and its management of change with digitalization, applied to Spanish tourism services, as ones of the largest case and most required of attention into the European Union. In comparison with other mainstream papers, this heterodox review is based on the combination of Austrian Economics and Neo-Institutional approaches (Cornucopists), with their common theoretical and methodological frameworks. Thus, it is possible to analyze failures and paradoxes in the public intervention, especially with post-COVID recovery policies. The case of the Spanish tourism sector highlights the effect of double bureaucracy, from European institutions and the Spanish Government, affecting its competitiveness and revealing the confirmation of heterodox theorems. Faced with mainstream public intervention guidelines, which usually involve expansive spending and more debt (and New-Malthusian measures), a heterodox mainline solution is offered here, based on the revival of the original sustainability principle, the readjustment effect and the promotion of geek'n'talent education, to facilitate the transition to the Knowledge Economy, where the tourism sector is capable of offering personalized travel experiences due to digitalization.

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The crowding-out effect of zombie companies on fixed asset investment: Evidence from China

Cited by 7 publications

References 53 publications

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

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

Zombie firms: a systematic review and future research directions

Public management of digitalization into the Spanish tourism services: a heterodox analysis

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