The Formation Mechanism Of Zombie Firms And Their Negative Externalities To Normal Firms

Zombie firms in our country has experienced several times,from 1999 to 2007,as the enterprise operation efficiency improvement,zombie presents a continuous decline in the proportion of enterprise,but after the 2007 financial crisis,the Zombie firms increased rapidly,after the 2009 stimulus in four trillion,the Zombie firms issue is preliminary relief,but after the policy effectiveness abate,zombies problem became more serious.On the one hand,the influence of zombie enterprises on economy lies in their low operating efficiency,which hinders the high-quality development of economy.On the other hand,zombie enterprises occupy a large number of productive resources and impose negative externalities on other normal enterprises.Central policymaking departments attach great importance to the problem of zombie enterprises.At the beginning of 2018,the national development and reform commission and other six departments issued the notice on doing a good job in reducing overcapacity in key areas in 2018,which clearly requires that zombie enterprises be disposed of as an important means of reducing overcapacity.The 2018 central economic work conference made it a priority to steadily promote the survival of the fittest and accelerate the disposal of "zombie enterprises" in 2019.Zombie enterprises have become the main obstacle of China’s economic transformation and the focus of supply-side structural reform.In recent years,the academia has also begun to pay attention to the zombie enterprises,and formed a series of high-quality research results.It is of great strategic significance to explore the formation mechanism of zombie enterprises and its adverse effects on normal enterprises for China’s economic development towards high quality.Based on the above background,this paper focuses on the perspective of bank credit distortion,studies the formation mechanism of zombie enterprises and the negative externalities of zombie enterprises on normal enterprises,and tries to provide constructive Suggestions for the prevention and disposal of zombie enterprises.This paper carries out the analysis through four core chapters.The third chapter identifies zombie enterprises in China based on the database of Chinese industrial enterprises,and further analyzes the distribution characteristics of zombie enterprises in China from time dimension,space dimension,industry dimension and enterprise age dimension.The study found that the proportion of zombie enterprises in state-owned enterprises was significantly higher than that of non-state-owned enterprises,and the proportion of zombie enterprises in both types of enterprises showed a downward trend before 2007.In the whole sample period,non-state-owned zombie enterprises carried less employment,while state-owned zombie enterprises carried more employment before 2004.After the laid-off wave of state-owned enterprises in 2004,the employment trend they carried matched the number,and they did not bear too much employment pressure.Non-state-owned zombie enterprises occupy more credit resources,while state-owned zombie enterprises and state-owned non-zombie enterprises occupy the same credit resources.The fourth chapter mainly analyzes how the local government USES the financial deposit resources to interfere in the credit decision of the bank,which makes the bank strengthen the excessive support for the enterprise,thus resulting in the decline of the enterprise’s operating performance,and finally increases the probability of becoming a zombie enterprise.Increased bank competition will intensify the effect,and different banking competition structure will vary,line large state-owned shares,bank and city firms dominated,weakened the effect of successive,finally in the city of firm bank dominated,competition to strengthen the local government interference ability,reflect the differences of different types of negotiating bank and the government ability.The fifth chapter discusses whether zombie enterprises interfere with the transmission of monetary policy interest rate and lead to structural differentiation of deleveraging in industrial enterprises.Central bank through open market operations to adjust bank funding costs,implementation of monetary policy intentions,when a zombie at preferential rates for companies to get loans from the bank,to make up for the cost of capital,the bank will improve enterprise’s normal lending rate(the "credit costs effect"),lead to enterprise financing was normal extrusion,tightening monetary policy,the impact.Chapter six studies the influence of the ratio of zombie enterprises at the provincial level on enterprise innovation,and further analyzes the regulatory effect of bank competition structure.From the perspective of bank credit market segmentation,zombie enterprises cause the mismatch of bank credit and crowd out the financing of normal enterprises,thus inhibiting the innovation of normal enterprises.The main contributions and innovations of this paper are reflected in the following aspects:First,in chapter 4,this paper studies that local governments interfere in bank credit decisions by controlling financial deposit resources,resulting in excessive investment by enterprises and further increasing the probability of enterprise zombification.Compared with the existing studies,the marginal contribution of this part is mainly reflected in the following aspects: firstly,combining the institutional characteristics of China,this part explores the motivation of Chinese Banks to provide "zombie credit",and then analyzes the unique mechanism of the formation of zombie enterprises in China.In China,there are few studies to consider the motivation of Banks to provide "zombie credit",while the explanations provided by relevant foreign studies do not conform to the typical fact of the formation of zombie enterprises in China.This part provides the explanation that Banks in China provide "zombie credit" to obtain financial deposits,thus catering to the intention of local governments.Secondly,it enriches the research on the influence of bank competition structure on bank credit behavior.It is difficult to reach a consensus on the effect of competition in the banking industry.This part of the study found that the increased level of competition among Banks would intensify the competition for deposits,further distort the direction of loans in the presence of government intervention,and the differences in competition structure would also lead to heterogeneity.Finally,this part discusses the specific mechanism of government intervention in Banks to promote the formation of zombie enterprises: local government intervention in Banks will lead to the excessive investment of enterprises,leading to the decline in the operating efficiency of enterprises,and eventually become zombie enterprises.To make up for the existing research on the government subsidies,bank subsidies on the formation of zombie enterprises purely mechanism of action.Second,in the fifth chapter,this paper analyzes the impact of zombie enterprises on tightening monetary policy deleveraging and its mechanism.This part of the marginal contribution summarized into three aspects: first,to the current popular focus on corporate leverage provides a new thinking direction of structural differentiation phenomenon,and the tightening of monetary policy to strengthen the Zombie firms credit cost effect,improved the normal enterprise financing costs,make efficient normal companies face tougher down leverage;Secondly,the mechanism of the crowding out effect of zombie enterprises on normal enterprises is proposed.Tan yuyan et al.(2017)studied the crowding out effect of zombie enterprises on normal enterprises.Thirdly,based on the financial statements of the company,the financing cost of the enterprise is calculated,and the interest rate of the enterprise loan is calculated by using the loan contract of the enterprise,so as to test the existence of the interest rate transmission mechanism of China’s monetary policy from the micro level.Third,in chapter 6,this paper analyzes the influence of zombie enterprises on the innovation of normal enterprises,and analyzes the role played by Banks.Compared with existing researches,this paper studies the crowding out effect of zombie enterprises on enterprise innovation from the perspective of bank credit distortion for the first time.Domestic Wang yongqin et al.(2018)studied the impact of zombie enterprises on enterprise innovation,but this paper focused on the fact that the existence of zombie enterprises intensified the competition in the end-product market at the industry level,while ignoring the financing crowding out effect at the regional level.This paper attempts to study the influence of zombie enterprises on the innovation activities of normal enterprises through the crowding out of credit,which enriches the literature on financing constraints and enterprise innovation,and also complements the new channels of zombie enterprises’ influence on innovation activities.