Risk Spillover Effect Of Zombie Firms To The Overall Risk Of Banking Industry

The long-term existence of zombie enterprises will reduce the efficiency of resource allocation,leading to serious economic consequences such as declining economic growth,overcapacity,security risks in the capital chain,and disrupting market order.The most critical issue is the debt disposal of zombies.Its high debt not only exacerbates the growing corporate debt problem in China,but also the banks continue to squeeze normal corporate capital resources for their own purposes,providing zombies with funding support will accumulate a huge asset bubble and financial crisis.Therefore,when carrying out the disposal of zombies,we should be vigilant and guard against the risks caused by the disposal of zombies’ debts,and prevent their further spread to the financial system.Based on this,this article studies the spillover effect of zombie corporate risks to banks based on the financial connection caused by zombie debts,with a view to providing reference suggestions for the disposal of zombie corporate debts under the premise of controlling risks.At the same time,because an important feature of the modern economic system is the high degree of connection between subjects,a subject’s breach of contract may trigger the breach of a number of subjects directly or indirectly related to it,the so-called domino effect.Therefore,the close financial relationship formed between zombie companies and banks can easily lead to risk diffusion,leading to corporate agglomeration of default and chain bankruptcy.The relationship between the entities in the economic system forms a network.In this network structure,the risks of an entity will not only spill over to the entity directly related to it,but also spill over to the other entities associated with the directly related entity.Risks are divergent in this process and are constantly amplified.Enterprises and banks are the two major players in the modern economic system,and the connections between the two are becoming increasingly dense.The bad debts of corporate entities result in bad debts of the bank.When the bank entities cannot afford the bad debts caused by the default of the corporate entities,the bank entities will go bankrupt.Banks are extremely important economic entities,and their bankruptcy will bring great negative effects.For this reason,it is necessary to study the risk contagion between banks and enterprises,especially between zombie firms and banks.Based on the existing research,this paper builds a network model that includes banks and zombies,zombies and mutual insurance companies,and studies the risk spillover of zombie firms to banks.This article follows the logical analysis framework of "credit relationship network-risk correlation-risk spillover",and mainly attempts to solve the following three aspects.The first is the risk spillover mechanism of zombie firms.Analyze the source of risk spillover,risk carrier and risk spillover path of zombie firms;the second is to test the path of risk spillover of zombie firms;the third is to build a simulation model of risk overflow of zombie enterprise to get the risk of zombie firms.Relevant thresholds for spillovers,based on this,put forward relevant suggestions for reasonable disposal of zombies under the premise of controlling risks.Based on the above research,the structure of this paper are as follows: The first part of this paper is the introduction.This part mainly introduces the research background and significance,puts forward the research ideas and finally explains the main innovation of this paper.Chapter 2 is a literature review.Mainly review the existing literature on zombie companies and risk spillovers at home and abroad,and focus on several aspects of risk spillovers in the macro financial system,micro-enterprise risk spillovers,real-enterprise and financial industry risk spillovers,and quantitative methods for risk spillovers.Review and evaluation.Chapter 3 is the background and identification of zombie companies.First,the macroeconomic background and institutional background of zombie companies are introduced.Second,based on the existing zombie company identification methods,five methods are used to identify zombie companies in listed companies in China from 2009 to 2018.Finally,the actual situation in China The identification method of zombie firms defined in this paper is given.Chapter 4 is the risk spillover mechanism of zombies.This part first analyzes the risk spillover mechanism of enterprises,including the components of risk spillovers: risk sources,spill carriers,and spill paths.First analyze the source of risk spillover,namely the credit risk and default risk of zombies;secondly,explain the risk carrier of corporate funds from the perspective of capital cycle and capital turnover,business credit perspective and social "credit chain" perspective;finally,the zombie firms Analyze the two spillover paths of bank risk.As the empirical part of this article,Chapters 5 and 6 test the first path of risk spillover for zombies.Chapter 5 constructs a matrix of row variables for each zombie company by manually organizing the loan data from the company to the bank.Banks that have had borrowing and lending relationships with zombies are zombies bank-enterprise credit networks with matrix column variables.Chapter 6 first establishes a CoVaR model to prove and calculate the magnitude of risk spillover from banks to banks by zombies.Secondly,through further analysis and empirical analysis,the relationship between the risk spillover level CoVaR of the zombies to the bank and the location of the bank-enterprise credit network,and the mechanism of the risk spillover of the zombies to the bank were examined.Chapter 7 examines the second path of zombie firms risk.Based on the embedded perspective of social networks,it studies the spillover of zombie firms risks in the guarantee network,and explores the risk spillover mechanism and institutional incentives.The empirical method proves that joining the zombie firms guarantee network will have a negative impact on the value of the company.When the zombie company in the guarantee network suffers a huge impact,the company providing the guarantee will bear the guarantee loss accordingly,thereby increasing the financial risk of the guarantee company.At the same time,it will also have an impact on corporate profitability and reduce corporate value.At the same time,given the amount of market resources,as zombies occupy too much credit resources at lower interest rates,causing credit distortions,at the same time they will inevitably occupy the proper financing of normal enterprises,thereby increasing the financing of normal enterprises.Costs further aggravate credit distortions.Chapter 8 is a dynamic simulation of credit risk spillover of zombies.First,the KMV model is improved based on the KMV model and the characteristics of the zombies.The dynamic default distance is used to estimate the optimal default distance and default probability of the zombies.Second,a network dynamic evolution model is used to simulate the network formed by the zombies’ capital exchanges.How does the risk spread from individual risks into the network and finally evolve to systemic risks? After dynamically solving the default risks of zombies and simulating their risk spillovers to other companies in the guarantee network,the default simulation results of the entire network were obtained.Therefore,based on the estimation of the bank’s tolerance for non-performing loans,the threshold value that may cause systemic risk is obtained.Chapter 9 is the main conclusions,recommendations and prospects.This article mainly summarizes the conclusions drawn from the empirical analysis of risk spillover effects of zombie companies,and then gives relevant policy recommendations.Finally,the limitations of the availability of sample data are explained,and the direction of further research is pointed out.In summary,this paper builds a credit network model of a zombie enterprise based on the credit connection between the two entities of the bank and the enterprise,and based on the network model studies the risk overflow of the zombie enterprise to the bank from two paths:one is the direct risk of the zombie enterprise spillover to the bank,the second is that the risk of zombie enterprises indirectly spillover to the bank through the guarantee network.Through the analysis of the two risk spillover paths of the zombie enterprise,it is found that the risk overflow of the zombie enterprise has a strong path dependence,and the following conclusions are drawn: First,the size of the risk overflow of the zombie enterprise is closely related to its position in the bank-enterprise credit network Related.The more the core of the zombie enterprise’s position in the network,indicating that the enterprise has more connections in the network,and the risks it generates are more likely to overflow.Secondly,the guarantee network of the zombie enterprise has exacerbated the degree of credit distortion.The enterprise value and repayment ability of the enterprises in the zombie enterprise guarantee network may be affected,resulting in a greater negative effect and further spillover to the bank,which magnifies its risk spillover Effect,government intervention plays a catalyst role in this process.In the end,this article dynamically simulates the risk spillover from zombies to banks.According to the KMV model,the dynamic default distance is used to estimate the optimal default distance and default probability of a zombie enterprise.At the same time,based on the probability of default,a network dynamic evolution model was constructed to simulate the mechanism of zombie enterprise risk overflow in the guarantee network.Finally,the default simulation results of the entire zombie enterprise network were obtained.The research conclusions of this paper help to formulate the classification and disposal plan of zombie enterprises,and dynamic simulation can help banks to track and feedback the risk signals of zombie enterprises in time and realize dynamic monitoring,so as to effectively control and prevent the systemic risks of banks caused by the risk overflow of zombie enterprises.