Research On Zombie Enterprises Governance In China

The report to the 19th national congress of the Communist Party of China(CPC)points out that "China's economy has shifted from a stage of rapid growth to a stage of high-quality development." High-quality economic development has become the focus of China's efforts to build a modern economic system.Enterprises are the microcosmic foundation of high-quality development of economy.However,zombie enterprises,which take up a lot of resources and maintain inefficient operation,are undoubtedly an obstacle to high-quality economic development.The Chinese government has repeatedly stated in official documents the urgency and specific requirements of cleaning up zombie enterprises.At present,the process of clearing zombie enterprises is speeding up.Cleaning up and disposing zombie enterprises is still a tough battle for the reform in the new era,and more theoretical guidance and innovation on zombie enterprises are needed.Existing theoretical research results are mainly based on the background of western zombie enterprises.Most of the researches on zombie corporate governance in China discuss the specific measures of clearing the market of zombie enterprises from the technical level.There is no literature on Chinese zombie corporate governance for systematic and in-depth research.Under the background of Chinese system,the formation of zombie enterprises is the result of excessive administrative intervention.How should market subjects respond to administrative intervention?Can political connections be conducive to the establishment of a benign government-enterprise relationship,to alleviate or even eliminate the adverse impact of administrative intervention,so as to inhibit the zombification of enterprises? In the micro field,efficient investment and financing activities of market entities are the driving force and source of sustainable economic development.What are the characteristics of investment and financing behaviors of zombie enterprises? Macroscopically,zombie enterprises cause risks and hidden dangers to economic operation,but what is the specific impact on economic growth?The existing literature has not systematically discussed these problems.Based on this,this paper takes zombie enterprise governance as the research object.From the perspective of the formation mechanism(etiology)and coping strategies of zombie enterprises,this paper discusses the path and long-term mechanism of preventing zombie enterprises from their root causes,and probes into the countermeasures of zombie enterprises' governance from the perspective of their economic consequences(symptoms),and tries to provide a solution to both symptoms and root causes of zombie enterprise governance.Specifically,this paper takes listed companies in Shanghai and Shenzhen stock exchanges from 2012 to2016 as samples.Based on the analysis of the status of zombie companies and the formation mechanism of zombie companies,it first conducts an empirical study on how political connections affect corporate zombification.Secondly,the micro effects of zombie enterprises are discussed from the perspective of corporate investment and financing behavior.Finally,the macro effects of zombie enterprises are discussed from the perspective of economic growth.Through theoretical analysis and empirical test,the main conclusions are as follows:Firstly,on the whole,the political connections has a inhibiting effect on the formation of zombie enterprises and zombification of enterprises.The analysis of the influencing factors shows that this inhibiting effect is influenced by the institutional environment such as ownership nature,marketization process and government competition.The inhibiting effect of political connections on the formation of zombie enterprises is more obvious in private enterprises,enterprises with higher marketization degree and enterprises with lower political promotion pressure.The inhibitory effect of political connections on zombification degree is more obvious in private enterprises and enterprises with higher marketization degree.Government competition does not affect the inhibitory effect of political connections on zombification degree.The analysis of the mechanism of action shows that political connections can influence the formation of zombie enterprises through financing convenience,fixed asset investment control and employee redundancy control.Secondly,zombie enterprises have soft budget constraints and investment opportunities constraints,which lead to the distortion of investment and financing behavior of zombie enterprises.Specifically,the new bank loans of zombie enterprises are not sensitive to the value of collateral;Although the new bank loans of zombie enterprises increase the investment of enterprises,their bank loans are not allocated to profitable or productive projects,and zombie enterprises do not make efficient investment.Further research finds that the market factors determining the financing behavior of zombie enterprises are relatively insignificant,and the empirical results further support the hypothesis that zombie enterprises have soft budget constraints.At the same time,the soft budget constraints of zombie enterprises are not affected by the nature of ownership and government competition.Thirdly,zombie enterprises have distinct effects on the speed and quality of economic growth.Overall,the correlation between zombie enterprises and regional GDP growth is not obvious;Zombie enterprises are negatively correlated with the quality of economic growth.Heterogeneity analysis shows that zombie enterprises have different impacts on GDP growth and economic growth quality depending on economic scale,regional environment and marketization process.In regions with small economic scale,central and western regions and regions with low marketization process,zombie enterprises are positively correlated with GDP growth.In regions with large economic scale,eastern regions and regions with high marketization process,zombie enterprises are negatively correlated with GDP growth.Meanwhile,the inhibition effect of zombie enterprises on the quality of economic growth is more obvious in regions with small economic scale,underdeveloped central and western regions and regions with low marketization process.Based on the research conclusion,this paper proposes a zombie enterprise governance strategy composed of long-term mechanism and specific countermeasures,and expounds its specific content.The long-term mechanism of zombie enterprise governance should not only strengthen the internal governance of the micro-subject,but also standardize and incorporate alternative systems such as political connections.Meanwhile,it should regulate government behavior and reduce excessive administrative intervention.Among them,the political connections are the link.Through the regulation of enterprises,the government and the informal system,a zombie enterprise comprehensive governance model that "government has action,government and business have boundary" can be constructed.The concrete measures of zombie enterprise governance mainly include two aspects.First,hardening budget constraints and improving the investment and financing efficiency of micro subjects;Second,we will reform and improve the promotion and assessment mechanism for officials and increase the supply of high-quality institutions.Through the long-term mechanism and specific measures,zombie enterprises can achieve the governance objectives of both symptoms and root causes.The results of this paper not only expand the research content of zombie enterprises theory,but also have important reference value for the practice of clearing and disposing zombie enterprises.Specifically,the expected innovations and contributions are as follows:Firstly,from the perspective of the formation mechanism and coping strategies of zombie enterprises,this paper discusses the influence of political connections on zombie enterprises.The research results expand the literature on the influencing factors of zombie enterprises and have important practical significance.Informal institution or alternative mechanism is an important part of zombie corporate governance mechanism,but there is little literature on it.The empirical results of this paper show that political connections can cope with or avoid the adverse impact of administrative intervention on the operation and development of enterprises,thus restraining the zombification of enterprises.However,when the degree of administrative intervention is strengthened,the inhibitory effect is weakened.The research results of this paper on the influencing factors of enterprise zombification expand the content for the interaction research on how the market subjects deal with the administrative intervention and the relationship between the two.The key enlightenment is to encourage the positive interaction between enterprises and the government,build the pro-qing relationship between government and business,and create a good political and business environment by standardizing and incorporating the alternative system of political connections,so as to establish a zombie corporate governance model in which the government interacts with the market.Secondly,the negative effects of zombie enterprises are empirically tested from the micro perspective of zombie enterprises' investment and financing behaviors.The research results not only enrich the relevant literature on the economic consequences of zombie enterprises,but also further explain the contents that should be focused on in the clean-up and disposal of zombie enterprises.There are relatively few research results on micro-effects of zombie enterprises.The empirical results of this paper show that zombie enterprises have soft budget constraints and investment opportunity constraints,which lead to the distortion of investment and financing behavior of zombie enterprises.The conclusion not only responds to the results of western research literature(Imai,2016),but also provides an important reference for the clean-up and disposal of zombie enterprises.Thirdly,the negative effects of zombie enterprises are empirically tested from the macro perspective of economic growth.The research results not only enrich the research literature on the macro effects of zombie enterprises,but also have distinct practical value.Although there are many research achievements on the macroeffects of zombie enterprises,most literatures focus on the crowding out effect and contagion effect of zombie enterprises on normal enterprise resource allocation.As far as this paper is concerned,no empirical research has been conducted on the direct impact of zombie enterprises on economic growth.This paper first discusses this.The results show that the economic scale,the regional environment and the process of marketization affect the motives and means of local government's intervention in enterprises,and then affect the relationship between zombie enterprises and GDP growth.The enlightenment of the policy is that it can provide high quality institutional supply for the cleaning and disposal of zombie enterprises through the reform and improvement of the promotion and assessment mechanism of officials.At the same time,the empirical results show that zombie enterprises inhibit the improvement of economic growth quality,which provides direct evidence support for the national policy of controlling zombie enterprises to boost the high-quality economic development.This paper consists of eight chapters,the structure of which is arranged as follows: The first chapter is an introduction,which introduces the background,research purpose,research ideas,research innovation,etc.The second chapter is a literature review,which reviews the literature in four aspects: the definition criteria,forming factors,economic consequences and governance measures of zombie enterprises,and clarifies the feasibility and value of the research.The third chapter is the theoretical analysis,which clarifies the definition and characteristics of zombie enterprises,analyzes the formation mechanism of zombie enterprises,proposes the measurement standard of zombie enterprises,and establishes the theoretical analysis framework of this paper.The fourth chapter analyzes the current situation of zombie enterprises,and focuses on the distribution and financial characteristics of zombie enterprises.Based on the formation mechanism of zombie enterprises,the fifth chapter empirically discusses the influence of political connections on the zombification of enterprises.Chapter six empirically discusses the micro-negative effects of enterprise zombification from the perspective of investment and financing behavior.Chapter seven empirically discusses the macro negative effects of enterprise zombification from the perspective of economic growth.Chapter eight summarizes the theoretical analysis and empirical results of the paper,draws research conclusions and proposes governance measures,and points out the research direction for further discussion.