Zombie firms and corporate savings: Evidence from Chinese manufacturing firms

Ling Feng, Henan Lang and Tingting Pei

International Review of Economics & Finance, 2022, vol. 79, issue C, 551-564

Abstract: Zombie firms may have substantial financial consequences. In a simple theoretical model, we show that the presence of zombie firms may increase the debt financing cost of non-zombie firms and induce the latter to rely more on internal funds. Consistent with model predictions, our empirical evidence on Chinese manufacturing firms from 1998 to 2007 demonstrates that, the presence of zombie firms will induce the non-zombie firms to save more, and this effect is particularly strong if the non-zombie firms are financially constrained and if the financial market condition is tight.

Keywords: Financial constraints; Firm savings; Zombie firms (search for similar items in EconPapers)
JEL-codes: E44 G32 O16 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:79:y:2022:i:c:p:551-564

DOI: 10.1016/j.iref.2022.02.008

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