In the new era of economic structural transformation and prevention of major risks, how to better deal with zombie firms has become a topic of common concern in the fields of decision-making, social practice, and academic research. Generally speaking, zombie firms refer to firms that have suffered losses for a long time, are unable to make profits, and have stagnant production, but can continue to survive with high government subsidies and low-interest bank credit, which have a serious negative impact on the high-quality development of the national economy. However, existing research has not paid enough attention to the key role of local governments, especially the setting of economic growth targets, in the disposal of zombie firms.
In this case, based on the reality that the economic growth target setting in various regions of China is generally higher than the real endowment, this paper takes listed companies from 2003 to 2020 as a sample to study the impact of growth target alignment on the degree of zombification of local firms. It is found that setting a growth target that fits the real endowment in a region can decrease the abnormal resource support that firms obtain and guide their healthy development, thereby reducing the zombification tendency of local firms. Further research finds that the aforementioned effect gradually weakens with the decreasing degree of growth target alignment, and is more pronounced in firms in state-controlled and monopoly industries. Moreover, growth target alignment can improve the profitability ability and reduce the debt scale of local firms, thereby realizing the dynamic governance effects of dezombification of normal firms and normalization of zombie firms, which ultimately has a positive impact on the market value and production capacity of corresponding firms.
This paper has the following contributions and inspirations in theory and practice. In theory, different from the literature that simply studies the value of growth target setting, this paper defines and scientifically measures the growth target alignment with the real endowment, and deconstructs the growth target into two parts: real endowment and growth target alignment, which provides an important extension of academic research on the economic consequences of growth goals and the disposal of zombie firms. In practice, this paper shows that local governments setting economic growth targets in line with the real endowment can optimize the efficiency of public resource allocation and improve the healthy development of firms, so as to effectively manage the phenomenon of local zombie firms, which strongly supports the active exploration of national leaders in the overall coordination of “promising government” and “efficient market”.