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Fear the Walking Dead? Incidence and Effects of Zombie Firms in Europe

Journal of Economic Science Research

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Field Value
 
Title Fear the Walking Dead? Incidence and Effects of Zombie Firms in Europe
 
Creator Hallak, Issam
Harasztosi, Péter
Schich, Sebastian
 
Subject productivity; zombie firms; corporate debt; interest rate coverage ratio
 
Description One explanation for the observed lack of economic dynamism in Europe is that so-called zombie firms are spreading and that they crowd out the growth of other, potentially more “lively”, companies. Zombie firms are firms that apparently are unable to repay their debt and yet, they continue operating. The report describes estimates for 2010 and 2013 of the incidence of zombie firms across 19 European countries using firm-level data for more than one million companies. Importantly, it uses three alternative definitions of what constitutes a zombie firm to ensure robustness of estimates. The report finds that zombie firms are spreading in Europe, with the estimated incidence for 2013 being higher than for 2010. It also identifies considerable differences across countries. Zombie firm shares as of overall corporate capital are particularly high in Greece and Spain, but low in the Czech Republic and Slovakia. Distinguish among firms in terms of size and age, the report finds that larger and older firms, as compared to relatively smaller and younger firms, are more likely to be zombie firms. The report also finds that the growth of zombie firms in terms of employment crowds out the growth of other, non-zombie firms, especially young ones. Thus, one policy implication is that, greater economic activity is achieved by allowing zombie firms to exit the market.
 
Publisher BILINGUAL PUBLISHING CO
 
Contributor —
 
Date 2018-12-29
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://ojs.bilpublishing.com/index.php/jesr/article/view/393
10.30564/jesr.v1i1.393
 
Source Journal of Economic Science Research; Vol 1, No 1 (2018)
 
Language eng
 
Relation http://ojs.bilpublishing.com/index.php/jesr/article/view/393/364
 
Rights Copyright © 2018 Issam Hallak, Péter Harasztosi, Sebastian Schich
https://creativecommons.org/licenses/by-nc/4.0