Giving zombie firms a second chance: An assessment of the reform of the Portuguese insolvency framework

Ernesto Nieto Carrillo, Carlos Carreira () and Paulino Teixeira

No 2022-02, CeBER Working Papers from Centre for Business and Economics Research (CeBER), University of Coimbra

Abstract: In most advanced economies productivity growth has been hampered by barriers that allow zombie firms to survive. We examine the effectiveness of institutional reforms in Portugal that were aimed to improve efficiency in insolvency framework. Estimates show that reallocation barriers declined. The reforms appear to have larger and more effective results in zombie recovery than in exit. Firm size plays a major role in tackling zombie-entrenchment. The decline in barriers has also implied a lower distortion in the economy-wide selection process. The new setting seems to be more desirable than forcing zombie exit at all costs.

Keywords: Insolvency regimes; Zombie firms; Productivity; Reallocation barriers; Firm exit; Restructuring. (search for similar items in EconPapers)
JEL-codes: D24 G32 G33 K22 L25 O47 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2022-01
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-eff, nep-fdg, nep-law and nep-sbm
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:gmf:papers:2022-02

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