The Rise of the Walking Dead: Zombie Firms Around the World

Bruno Albuquerque and Roshan Iyer

No 2023/125, IMF Working Papers from International Monetary Fund

Abstract: We build a new dataset of listed and private nonfinancial zombie firms for a large set of Advanced Economies and Emerging Markets over the last two decades. We find that the share of these unproductive and unviable firms has been rising worldwide, especially since the GFC and the Covid-19 pandemic. We show that, perhaps surprisingly, the incidence of zombification is lower among private firms. Lower average survival rates of private firms may explain this phenomenon. We find important negative macrofinancial spillovers from zombie firms: nonzombies’ financial performance is persistently reduced in industries populated with a greater number of zombies. To mitigate these effects, we document that countries with stronger banks, and tighter macroprudential policies tend to have fewer zombies and stronger nonzombies. Strengthening the banking sector may, however, not be sufficient if insolvency frameworks are not well-prepared to deal with the restructuring or insolvency of firms.

Keywords: Zombie firms; Listed and private firms; Corporate investment; Congestion effects; Macroprudential policies; Panel data; zombie firm; nonfinancial zombie firm; insolvency framework; unviable firm; insolvency of firm; Financial statements; Countercyclical capital buffers; Solvency; Credit; Employment; Global (search for similar items in EconPapers)
Pages: 69
Date: 2023-06-16
New Economics Papers: this item is included in nep-fdg
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Citations: View citations in EconPapers (14)

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Journal Article: The rise of the walking dead: Zombie firms around the world (2024)
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