Does Joint Credit Granting inhibit corporate zombification? Evidence from China

Purpose The frequent emergence of zombie firms jeopardizes the development of the real economy, and bank credit misallocation is the key reason for this. In this regard, the paper examines whether Joint Credit Granting-a policy regulating bank credit practices-effectively mitigates corporate zombification. Design/methodology/approach This paper analyzes a dataset of Chinese listed firms from 2013 to 2022 and uses a difference-in-differences approach. The Joint Credit Granting is regarded as a quasi-natural experiment. Findings The implementation of Joint Credit Granting significantly inhibits corporate zombification. This effect is realized through two primary channels: enhancing corporate information transparency and internal governance efficiency, and correcting the misallocation of bank credit. Originality/value This paper offers novel insights into the efficacy of Joint Credit Granting and provides valuable perspectives on the governance of zombie firms. In addition, this paper enriches the economic effects research on bank information-sharing mechanisms.