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

Jiani Li, Jie Li and Tianhang Zhou

Economics of Transition and Institutional Change, 2023, vol. 31, issue 4, 853-876

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.

Date: 2023
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https://doi.org/10.1111/ecot.12358

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Persistent link: https://EconPapers.repec.org/RePEc:wly:ectrin:v:31:y:2023:i:4:p:853-876

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