ISSN: 1648 - 4460

International Journal of Scholarly Papers


Transformations  in
Business & Economics

Transformations in
Business & Economics

  • © Vilnius University, 2002-2022
  • © Brno University of Technology, 2002-2022
  • © University of Latvia, 2002-2022
Weiwei Zhang, Lan Bo, Mahfuzul Haque

ABSTRACT. While China is promoting the supply-side structural reform, the "stiff but deathless" zombie enterprises in the system soak up the economic resources and impede the growth of healthy and sustainable economic development of the country. This study on zombie enterprises could provide clues on the theoretical implications and understanding of the root reasons for the problem.
From the game theory perspective, we analyse the internal mechanism of a stiff but deathless" zombie enterprise centred on a trilateral game model of the enterprise, government and banks. Then we develop the game model in the context of China by introducing the state-owned and private-owned enterprises. Moreover, a comparative case study on the two real zombie enterprises was conducted to explain the paradox in China. We find from the Nash equilibrium solution for rational government and banks is not to disrupt the development of zombie enterprises. However, the paradox in China shows that the government's bailout and bank credit support are the main obstacles to clearing out the zombie enterprises. We suggest each party involved should follow the law and market economy in China to make both the enterprises and the economy vibrant .

KEYWORDS:  zombie enterprises; trilateral game; state-owned enterprises; private enterprises; government intervention; bailout.

JEL classification:  E22, D22, G3, L2, O16, O53.

6Acknowledgement:  Funding: The National Social Science Fund of China funded the research, grant number 20BJY106.

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Scholarly papers Transformations in Business & Economics
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