Does the opening of high-speed rail inhibit corporate zombification?

Ruoyu Zhu, Kehu Tan and Xiaohui Xin

International Review of Economics & Finance, 2024, vol. 93, issue PA, 372-389

Abstract: In the context of emphasizing economic efficiency and development quality, how to dispose of zombie enterprises has become a major challenge worldwide. This study employs a time-varying DID model to investigate the effects of high-speed rail (HSR) on corporate zombification using data from China A-share listed companies. It is found that the rollout of HSR indeed restrains corporate zombification, and this result persists after an extensive set of robustness tests. Mechanism analysis showed that the launch of HSR can inhibit corporate zombification through three mechanisms: curbing government intervention, reducing credit distortions and increasing corporate profitability. Heterogeneity analysis revealed that the inhibiting effect of HSR is more pronounced in private firms and cities with low initial transportation resource endowments. Furthermore, by decomposing the disposition of zombie enterprises into two specific paths: reviving existing zombie enterprises and inhibiting the formation of new zombie enterprises, we found that the opening of HSR has no significant effect on reviving existing zombie enterprises but has a significant effect on inhibiting the formation of new zombie enterprises, i.e., the inhibiting effect of the opening of HSR on zombie enterprises is mainly achieved through the path of inhibiting the formation of new zombie enterprises. This paper not only contributes to the literature on evaluating the economic effects of HSR, but it also provides policymakers with pertinent recommendations on how to guide zombie firms to de-zombify.

Keywords: The opening of high-speed rail; Corporate zombification; Zombie firms; Government intervention; Credit distortion; Profitability (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:93:y:2024:i:pa:p:372-389

DOI: 10.1016/j.iref.2024.03.022

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