Zombie firms, external support and corporate environmental responsibility: Evidence from China

This paper investigates the relationship among zombie firms, external support and corporate environmental responsibility. Zombie firms refer to firms that should go bankrupt because of low efficiency and profitability but survive with external support from government or bank. Using a sample of Chinese listed companies over the period 2010-2016, we find that zombie firms have lower corporate environmental responsibility performance than non zombie firms. Such an effect is more pronounced when zombie firms receive a greater amount of external support from government or bank. The negative impact of zombie firms on corporate environmental responsibility performance is stronger in heavily polluting industries and state-owned enterprises. To deal with potential self-selection and endogeneity issues, Heckman two-step estimation and propensity score matching approaches are used to verify the validity of our results. Our results are also robust in the sensitivity test of changing measurement of zombie firms. (C) 2018 Elsevier Ltd. All rights reserved.