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Environmental regulation and the proliferation of zombie firms: evidence from China

Yunguo Lu et al.

Journal of Regulatory Economics2025https://doi.org/10.1007/s11149-025-09504-warticle
AJG 2ABDC A
Weight
0.50

Abstract

This paper examines the impact of environmental regulation on the emergence of zombie firms within China’s pollution levy system. Using firm-level data from multiple sources and a difference-in-differences design, we show that imposing a higher level of pollutant levy rates significantly elevates the risk of firms becoming zombies. Switching to a more stringent policy increases the risk of becoming a zombie firm by 6.2%. Consequently, we find that being a zombie firm implies that it allocates fewer resources to pollution abatement, exhibiting higher pollution intensity. We also show that less productive firms and state-owned firms are more prone to becoming zombie firms when facing with increased level of environmental regulation stringency. This study thus provides novel insights into the unintended risk of zombie firm proliferation as a result of increasing environmental regulation.

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https://doi.org/https://doi.org/10.1007/s11149-025-09504-w

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@article{yunguo2025,
  title        = {{Environmental regulation and the proliferation of zombie firms: evidence from China}},
  author       = {Yunguo Lu et al.},
  journal      = {Journal of Regulatory Economics},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1007/s11149-025-09504-w},
}

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Environmental regulation and the proliferation of zombie firms: evidence from China

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.