The Identification Of Zombie Company And Coping Strategies Of Commercial Banks

Zombie companies are businesses that continue to operate even though they are insolvent or near bankruptcy deal to the support from banks or government.Different from those with temporary operational difficulties who can recover in a short time,zombie companies rely on banks or government for their continued existence,putting them on never-ending life support.But if banks and government refuse to help the zombie companies,the social situation may become worse.So the zombie companies often kidnap banks and government.Japan and America once suffered from zombie companies,and we can learn from them some actions they take.Nowadays,there are a mount of zombie companies in the overcapacity industries in China.With the policies of supply-side structural reform and phasing out outdated production capacity,it is quite likely that many zombie companies will breakdown,which may cause credit defaults and risk transmitting between parent subsidiary company,upstream and downstream firms and guarantor enterprise.Banks may suffer high non-performing loans ratio and bad credit assets.Therefore,it is important for banks to identify zombie companies and cope with them properly.The article based on the studies of Caballero,Hoshia and Kashyap,National Academy of Development and strategy,and Dong dengxin of Wuhan University of Science and Technology,designed a series of indexes for commercial banks to identify zombie companies.The identification indexes are for finding out zombie companies,and the estimate indexes are for evaluating zombie companies.The government should guide and support the clearing of zombie companies.As to commercial banks,on one hand,they should actively cooperate with the government,on the other hand,they should strengthen the communication with the government to obtain understanding and supports.The commercial banks should follow schedules of the clearing of zombie companies closely,and take differentiated and dynamically credit management methods.Besides,they should pay attention to the challenges that the zombie companies may bring when M&A,debt-equity swap and transfer of shell resource occur.