Can the Belt and Road Initiative Promote the Dezombification of Firms?

ABSTRACT

Based on China’s supply-side structural economic reforms, this paper examines the impact of the Belt and Road Initiative (BRI) on the formation of zombie firms. We find that the BRI significantly inhibits the formation of zombie firms by easing financial constraints and optimizing investment efficiency. Our findings are robust to different model specifications and samples. Further investigations find that the impact of the BRI is pronounced for private enterprises, manufacturing enterprises and enterprises with more intense market competition. Overall, our results provide clear policy implications by shedding light on the role of the BRI in optimizing the allocation of resources.

KEYWORDS:

• BRI
• zombie firms
• total factor productivity
• financial constraints

JEL CODE:

• F42
• F68
• G10

Acknowledgment

We thank all seminar participants at Jinan University, Sun Yat-sen University, Wuhan University, Tsinghua University, and Xiamen University, for helpful comments.

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

We acknowledge the financial support of the National Natural Science Foundation of China (grant no. 72272041), Guangdong Natural Science Foundation (grant no. 2020A1515011231), the Guangdong Province Philosophy and Social Sciences Program (grant no. GD22CGL42). All errors are our own. All authors contribute equally to this paper.