Why do zombie firms seldom die or resurrect? The effect of government subsidies on the survival duration of China’s zombie firms

Abstract One of the most important tasks in China’s supply-side structural reform is to effectively clean up zombie firms. Using industrial firm-level data China from 1998 2007, we identified firms Chinese sectors. Based on firms, measured survival duration and empirically studied effect fiscal subsidies by using analysis. Results revealed that significantly lengthened Specifically, not only reduced possibility exiting market, but more importantly, they firms’ resurrection. Thus, do contribute “death” or “resurrection” These results are robust despite changing identification method analysis method, considering endogeneity subsidies. Our findings show should adhere market-oriented mechanism disposing cut off channels government transfuses