Can Digital Transformation Reduce the Zombification of Enterprises?

Digital transformation stimulates enterprise development but its effects on zombification are uncertain. This study analyzed the effects of digital transformation on de‐zombification among A‐share listed Chinese companies in Shanghai and Shenzhen Stock Exchanges from 2009 to 2021 and the mechanisms underlying those effects. The findings indicated that digital transformation facilitated enterprise de‐zombification, with a stronger effect observed in state‐owned enterprises, high‐tech enterprises, firms in industries with low levels of competition, those with advanced digital transformation, and cities with high levels of government intervention. Further analysis identified improved production efficiency and capital allocation as important factors enabling this process. Enterprises at risk of zombification should prioritize digital transformation as a fundamental strategy for recovery. Governance strategies should be tailored to the specific characteristics of various types of zombie enterprises. The government may consider offering financial or tax incentives to assist these firms in their digital transformation efforts, enabling them to overcome the challenges associated with zombification while enhancing both production efficiency and the efficacy of capital allocation.