Zombie firms: Prevalence, determinants, and corporate policies

Sadok El Ghoul, Zhengwei Fu and Omrane Guedhami

Finance Research Letters, 2021, vol. 41, issue C

Abstract: Using a comprehensive dataset of firms from seventy-nine countries, we document the incidence, determinants, and corporate policies of zombie firms for the 2005–2016 period. Zombie firms account for roughly 10% of our observations. We find that countries with more efficient debt enforcement environments tend to have fewer zombie firms. We find no evidence that the prevalence of zombie firms is related to national culture. We further find that zombie firms have conservative dividend and investment policies, aggressive leverage policies, and higher idiosyncratic risk. We conclude that zombie firms may impose a cost on the economy by impeding efficient resource allocation.

Keywords: Zombie firms; Debt enforcement; Corporate policies (search for similar items in EconPapers)
JEL-codes: G32 G33 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:41:y:2021:i:c:s1544612320316901

DOI: 10.1016/j.frl.2020.101876

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