Zombie firms in Canada

Alexander Amundsen, Amélie Lafrance-Cooke and Danny Leung

Economic and Social Reports from Statistics Canada, Analytical Studies and Modelling Branch

Abstract: The literature shows that zombie firms can lower aggregate productivity, impede reallocation and constrain the growth of healthy firms. In Canada and other advanced economies, the share of zombie firms has been rising over the past few decades, with recent studies showing that the share in Canada could potentially be the highest in the world. However, these studies of the Canadian context are based only on publicly traded Canadian firms. This paper presents new evidence on zombification using Canadian-controlled private corporations and publicly traded firms. The paper finds that the zombie share among all firms is considerably lower and diverging in trend. However, a number of notable results show that zombies are increasingly showing up in the mining, quarrying, and oil and gas extraction sector; they are accounting for more resources over time; their performance and productivity are worsening; they are negatively impacting the productivity and growth of healthy firms; and they are increasingly lowering aggregate productivity by a sizable margin.

Keywords: zombie firms; canadian-controlled private corporations; publicly traded firms (search for similar items in EconPapers)
JEL-codes: J23 M21 (search for similar items in EconPapers)
Date: 2023-03-22
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Persistent link: https://EconPapers.repec.org/RePEc:stc:stcp8e:202300300003e

DOI: 10.25318/36280001202300300003-eng

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