Stimulus Packages And Zombie Firms

In late 2008,the Chinese government launched the 4 trillion stimulus package in response to the global financial crisis.While this short-term stimulus package brought a rapid recovery to the Chinese economy,it also caused many unintended side effects: overcapacity in many key industries,high leverage of state-owned enterprises,and deep indebtedness of local governments.This led to most of the stimulus money flowing to cities with a high proportion of state-owned enterprises.The emergence of a large number of zombie enterprises is not only detrimental to the effective allocation of credit resources but also has an impact on the investment behavior of micro-enterprises.Therefore,we use the quasi-natural experiment of the quadrillion stimulus package to conduct an empirical analysis that helps us further clarify the reasons for the emergence of zombie enterprises.In this thesis,we select A-share listed companies in China from 2005 to 2012 as the sample,identify zombie enterprises by referring to the existing real profit method,and divide the sample into experimental and control groups by using the monetary policy transmission channel that the Chinese owned enterprises are more likely to obtain more credit support under the stimulus plan,and examine the changes of zombie enterprises in different cities before and after the policy stimulus.The heterogeneity of this impact mechanism in the sample with different equity nature and different firm sizes is further analyzed.The following conclusions are obtained: firstly,more zombie firms may appear in cities with a higher share of SOEs after China’s 2008 stimulus package.This result may be due to the fact that government investments led through SOEs tend to focus more on employment-related projects than on efficient projects,especially in times of crisis.The resource misallocation associated with crisis rescue programs may lead to productivity inefficiencies that result in the emergence of more zombie firms.To further investigate the mechanism of the impact of stimulus packages on zombie enterprises.This thesis also conducts a heterogeneity test based on the nature of the enterprise and the production scale of the enterprise,and finds that firstly,because of the higher number of workers in larger enterprises may bring more negative effects if the enterprise is allowed to fail,the government is more inclined to bail out larger enterprises,thus making enterprises with more workers more likely to become zombie enterprises.Secondly,the article finds that the crowding-out effect of zombie enterprises increases the likelihood that urban non-state enterprises with a high proportion of state-owned enterprises will be transformed into zombie enterprises.After empirical test analysis in order to ensure the robustness of the findings,a score propensity matching,using different percentages of SOEs,a placebo test and a regression method using logit models and ols were used to conduct robustness type tests,and the results were significant proving the accuracy of the baseline regression results.Finally this thesis puts forward policy recommendations after studying the mechanism of the impact of the stimulus package on the emergence of zombie enterprises,arguing that firstly,in the event of a crisis,the crisis can crisis as a natural part of the market system,providing a signal to distinguish between poorly run enterprises and good enterprises,and that market mechanisms can be used to accelerate the disposal of zombie enterprises;secondly,policy intervention is not undesirable,and government policy in the event of a crisis Subsidies at the same time should also focus on the implementation of the policy effect of supervision after the fact,to prevent the policy intention to distort the occurrence of the zombie increase;at the same time we also want to state-owned enterprise reform,state-owned enterprises should change the goal of "do better sit bigger and stronger" to change the development strategy "do better and stronger ".Finally,the disposal of zombie enterprises will inevitably bring unemployment,but also to properly dispose of the disposal of personnel after the disposal of the problem.