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The risk transmission mechanism of zombie enterprises persistence and systemic risk in regional banks

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  • Tang, Kaitao
  • Niu, Jie
  • Zhao, Lin

Abstract

Safeguarding financial stability is essential for achieving high-quality economic development, with systemic risk in regional banks representing a critical concern. Drawing on data from Chinese A-share listed firms during 2011–2018, this study investigates how zombie enterprises contribute to systemic risk in regional banks. The findings reveal that the persistence of zombie enterprises amplifies borrowing activities and financial asset allocation, generating risk spillovers that heighten systemic vulnerability. Robustness checks confirm these results. Further analysis demonstrates that the negative impact of zombie enterprises is more pronounced in regions characterized by weaker banking competition, lower levels of marketization and inclusive digital finance, and higher government subsidies. These results highlight the necessity for policymakers to effectively dispose of zombie enterprises in order to safeguard financial security and support sustainable, high-quality economic growth.

Suggested Citation

  • Tang, Kaitao & Niu, Jie & Zhao, Lin, 2026. "The risk transmission mechanism of zombie enterprises persistence and systemic risk in regional banks," Finance Research Letters, Elsevier, vol. 91(C).
    • Handle: RePEc:eee:finlet:v:91:y:2026:i:c:s1544612325025036
    DOI: 10.1016/j.frl.2025.109254
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