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

June 16, 2023

Preview Citation

Format: Chicago

Bruno Albuquerque, and Roshan Iyer. The Rise of the Walking Dead: Zombie Firms Around the World, (USA: International Monetary Fund, 2023) accessed December 21, 2024

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.

Summary

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.

Subject: Countercyclical capital buffers, Credit, Employment, Financial regulation and supervision, Financial sector policy and analysis, Financial statements, Labor, Money, Public financial management (PFM), Solvency

Keywords: Congestion effects, Corporate investment, Countercyclical capital buffers, Credit, Employment, Financial statements, Global, Insolvency framework, Insolvency of firm, Listed and private firms, Macroprudential policies, Nonfinancial zombie firm, Panel data, Solvency, Unviable firm, Zombie firm, Zombie firms

Publication Details

Pages:

69
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2023/125
Stock No:

WPIEA2023125
ISBN:

9798400246890
ISSN:

1018-5941

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