Abstract: Zombie enterprises occupy a lot of scarce social resources and make ineffective investments, which distorts the market allocation of production factors and causes a series of negative external effects on the development of normal enterprises. By making use of the data of industrial enterprises above the designated size in China and the data of A-share listed companies, this paper conducts an empirical research. The findings show that regional zombie enterprises have significantly improved the level of asset financialization of normal enterprises, and the results are still robust when the instrumental variable method and different measurement indicators are adopted. The results of the channel analysis show that aggravating the financing constraints of normal enterprises, increasing the tax burden of normal enterprises, and creating a large amount of excess capacity are important ways for zombie enterprises to induce the asset financialization of normal enterprises. The results of the extensive analysis show that there is heterogeneity in the impact of zombie firms on the normal firms. Specifically, zombie enterprises have a greater impact on the non-state-owned enterprises, the industries with high dependence on external financing, and the regions with strong degrees of government intervention, while their impacts on the state-owned enterprises, the industries with lower external financing dependence, and the regions with weak government intervention are smaller.

Key words: zombie enterprise, negative externality, deviating from the real to the virtual