Study On The Influence Of Political Connection On The Formation Of Zombie Enterprises

The so-called "zombie enterprises" refer to those enterprises that have lost their operational capacity and should have withdrawn from the market but survived due to nonmarket factors such as bank loans and government subsidies.Based on economic theory,in the context of a fully competitive market mechanism,the “zombification” state is not stable.Enterprises that pursue maximum profit will rationally choose to withdraw from the market in the long-term loss.The “invisible hand” will eventually eliminate the zombies and make the market is again in equilibrium.However,in the long run,the phenomenon of zombie enterprises whose market entities have been losing money for years and cannot be properly withdrawn is not in line with the assumptions of economic man.So,what is the cause of this phenomenon? In the context of China's special system,the development of enterprises depends to a large extent on the acquisition of resources from non-market mechanisms,and the establishment of political connections is the most common way.Domestic studies have shown that resources mismatch under political intervention has led to the loss of credit resources and government subsidies by lossmaking enterprises that are lower than the market's optimal interest rate,which is the basis for the survival of zombie enterprises.However,foreign scholars mainly analyzed the role played by Japanese main banks in the process of obtaining credit resources by zombie enterprises.In contrast,in the Chinese society that emphasizes "relationship",the formation of zombie enterprises is not only affected by the relationship between banks and enterprises,but also depends on the intimacy of corporate executives and government departments,that is,whether there is political connection.Whether or not a company's executives have political connections not only reflects the degree of closeness between the company and the government,but also shows the ability of enterprises to acquire resources.Then,in addition to bringing more resources into the enterprise,political connections will have a strong negative externality and even become a catalyst for the formation of zombie enterprises.Based on this,this paper uses the combination of theory and empirical analysis to study the impact of political connections on zombie enterprises.Firstly,based on the stakeholder theory,rent-seeking theory and resource dependence theory,this paper discusses the direct impact of political association on the formation of zombie enterprises.Then,it further analyzes the influence mechanism and concludes that political association will promote the formation of zombie enterprises through government subsidy effect and credit financing effect.In addition,this paper analyzes the heterogeneous influence of political association on the formation of zombie enterprises from the perspective of property right nature and institutional environment.Secondly,this paper modifies the FN-CHK method,re-establishes the model framework for identifying zombie enterprises,and then uses the excessive lending method and the FN-CHK(R)standard modified by this paper to identify zombie enterprises.The statistical analysis of the identification results by year,industry,ownership and region,to make a more comprehensive and clear understanding of the distribution characteristics of zombie enterprises.Finally,taking listed companies from 2009 to 2017 as the research object,this paper constructs the Logit bidirectional fixed effect model and intermediary effect model,respectively examining the total effect and intermediary effect of political association on the formation of zombie enterprises.For further analysis,this paper also carries out the robustness test of the benchmark regression model by means of sample regression test of property right nature,institutional environment difference and the heterogeneous influence brought by regional factors,and adopts the systematic GMM method to alleviate the endogenous problems existing in the model.The research results show that:(1)zombie enterprises have significant time,industry,ownership and regional distribution characteristics.In the statistical analysis of the years,the zombie enterprise problem is the most serious from 2013 to 2015,and the number and proportion of zombie enterprises are decreasing after 2015.At the sub-industry level,zombie companies are mainly concentrated in industries such as mining and manufacturing.In terms of ownership characteristics,zombie enterprises in state-owned enterprises are more serious.In terms of regional distribution,zombie enterprises have a lower proportion but a higher number in the eastern region,while zombie enterprises have a higher proportion and a lower number in the western and central regions.(2)Political associations significantly increased the probability of zombie enterprises forming,and this conclusion passed robustness test.(3)Political associations have promoted the formation of zombie enterprises through the transmission mechanism of government subsidy effect and credit financing effect,but the government subsidy effect of political association is weak.Therefore,the impact of government subsidy mechanism on zombie enterprises is relatively limited.(4)The influence of political association on zombie enterprises is heterogeneous: the promotion effect of political association on the formation of zombie enterprises is more significant in regions with strong local government intervention and low level of rule of law.In addition,there are regional differences in the role of political connections in zombie companies: their impact on the western region is significantly higher than in the central and eastern regions,and this effect is the weakest in the eastern region.The research results of this paper not only deepen the understanding and understanding of the influence of political associations on zombie enterprises,but also provide a new reference for the government decision-making departments to optimize the governance of zombies and formulate relevant supporting policies.