Do ‘zombie firms’ emerge among private firms in China? A survival analysis approach that pays attention to the reception of trade credit

ABSTRACT We investigated whether ‘zombie firms’ emerged among private firms in China, by using the survival analysis of private firms. We found that receiving trade credit allowed poor-performing private firms to survive in markets in China. This type of survival of private firms was more pronounced for large-sized private firms. There was evidence of the existence of zombie firms among private firms in China, which were generated from unsound trade credit finance, an informal type of finance. Poor-performing private firms in China avoided exiting the market with access to an informal debt finance in non-negligible cases.