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The Rise of the Walking Dead: Zombie Firms Around the World
Author:
Bruno Albuquerque
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Roshan Iyer
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Series:
IMF Working Papers
Volume/Issue:
Volume 2023: Issue 125
Language:
English
Publication Date:
16 Jun 2023
DOI:
https://doi.org/10.5089/9798400246890.001
ISBN:
9798400246890
ISSN:
1018-5941
Pages:
69
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
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund