In recent years, the persistence of zombie firms has emerged as a critical challenge for financial market efficiency in emerging economies. This paper investigates the impact of zombie firm presence on the cost of debt of healthy firms, using data from A-share listed firms in China over the period 2007 to 2022. The results demonstrate that zombie firms substantially increase the cost of debt of healthy firms. This impact is particularly pronounced among non-state-owned enterprises, firms that rely heavily on external financing, and smaller-scale businesses. From the perspective of negative externalities, further analysis reveals two distinct channels. First, through the credit-supply channel, zombie firms crowd out credit resources available to healthy firms, intensifying their financing constraints and forcing lenders to charge higher rates. Second, through the information-pricing channel, the earnings management practices of zombie firms create a contagion effect that reduces the information transparency of healthy firms, deepening information asymmetry with lenders and ultimately increasing their cost of debt.However, greater bank competition helps mitigate the negative impact of zombie firms on the cost of debt.