Are you a Zombie? A Supervised Learning Method to Classify Unviable Firms and Identify the Determinants

53 Pages Posted: 7 Jul 2020 Last revised: 29 Jan 2021

See all articles by Angela De Martiis

Angela De Martiis

University of Bern

Thomas Heil

Zeppelin Universität

Franziska J. Peter

Zeppelin University

Date Written: January 29, 2021


We examine the determinants of zombie companies using a comprehensive firm-level dataset of public corporations from Europe and the United States. We show that US zombie companies differ from their European peers on a number of firm-specific and industry-specific factors. Using decision trees, we document that income and leverage-related variables are among the main drivers classifying zombie companies in Europe, while dividends and stock-related variables are the most important in the US. We observe a frequent mislabeling of zombie firms into other unviable types of firms. To account for this, we also examine the determinants of distressed firms and compare them to the zombie. We find that zombie and distressed are not comparable types of companies, rather companies at a different stage of their financial unviability. We also document that zombification is especially a European phenomenon, while distressed-type of firms are mostly populating the US economy. We find no major differences in terms of zombie company-specific determinants between crisis and non-crisis periods.

Keywords: zombie firms, financial constraint, decision trees, distressed firms

JEL Classification: C55, C63, D22, E44, G32, G33

Suggested Citation

De Martiis, Angela and Heil, Thomas and Peter, Franziska, Are you a Zombie? A Supervised Learning Method to Classify Unviable Firms and Identify the Determinants (January 29, 2021). Available at SSRN: or

Angela De Martiis (Contact Author)

University of Bern ( email )

Muesmattstrasse 27
Bern, 3012


Thomas Heil

Zeppelin Universität ( email )

Am Seemooser Horn 20
DE-88045 Friedrichshafen

Franziska Peter

Zeppelin University ( email )

Am Seemooser Horn 20
Friedrichshafen, Lake Constance 88045

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