Local Government Debt and Firm Zombification: Evidence from China-Reference-Cited by-同舟云学术

Local Government Debt and Firm Zombification: Evidence from China

Published:2023 Issue:2 Volume:22 Page:68-95
ISSN:1535-3516
Container-title:Asian Economic Papers
language:en
Short-container-title:

Author:

He Yang¹,Ma Yun²,Tang Meng³,Wang Lu⁴

Affiliation:

1. School of Public Finance and Taxation Central University of Finance and Economics Changping District, Beijing, 102206, China heyang@cufe.edu.cn

2. School of Economics Fudan University Yangpu District, Shanghai, 200433, China 18893716863@163.com

3. Antai College of Economics and Management Shanghai Jiao Tong University Xuhui District, Shanghai, 200030, China tangmeng8304@sina.com

4. School of Public Finance and Taxation Central University of Finance and Economics Changping District, Beijing, 102206, China 2020110021@email.cufe.edu.cn

Abstract

Abstract We analyze the effects of local government debt on the proliferation of zombie firms. With aggregated prefecture-level debt data and firm-level data from 2006 to 2013, the empirical evidence demonstrates that the local government debt significantly exacerbates the “zombification” of local firms, mainly through the credit-favoritism to state-owned enterprises and capital misallocation. Our analysis also shows that the magnitude of zombification effects is influenced by debt liquidity and the primary functions of local government financing vehicles.

Publisher

MIT Press

Subject

Political Science and International Relations,Economics and Econometrics,Finance

Link

https://direct.mit.edu/asep/article-pdf/22/2/68/2122960/asep_a_00865.pdf

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