Zombie Firms: Prevalence, Determinants, and Corporate Policies

14 Pages Posted: 7 Dec 2020 Last revised: 10 Dec 2020

See all articles by Sadok El Ghoul

Sadok El Ghoul

University of Alberta - Campus Saint-Jean

Zhengwei Fu

University of South Carolina - Moore School of Business

Omrane Guedhami

University of South Carolina - Moore School of Business

Date Written: December 2, 2020

Abstract

Using a comprehensive dataset of firms from seventy-nine countries, we document the incidence, determinants, and corporate policies of zombie firms from 2005 through 2016. Zombie firms account for roughly 10% of our observations. Using logit regressions, we find strong and robust evidence that countries with more efficient debt enforcement environments tend to have fewer zombie firms. In contrast, we find no evidence that the prevalence of zombie firms is related to national culture. We further find that zombie firms have conservative dividend and investment policies, aggressive leverage policies, and higher idiosyncratic risk. We conclude that zombie firms may impose a cost on the economy by impeding efficient resource allocation.

Keywords: Zombie firms; Debt enforcement; Corporate policies

JEL Classification: G32; G33

Suggested Citation

El Ghoul, Sadok and Fu, Zhengwei and Guedhami, Omrane, Zombie Firms: Prevalence, Determinants, and Corporate Policies (December 2, 2020). Available at SSRN: https://ssrn.com/abstract=3740950 or http://dx.doi.org/10.2139/ssrn.3740950

Sadok El Ghoul

University of Alberta - Campus Saint-Jean ( email )

Edmonton, Alberta T6G 2R3
Canada
780-465-8725 (Phone)
780-465-8760 (Fax)

Zhengwei Fu (Contact Author)

University of South Carolina - Moore School of Business ( email )

1014 Greene st, Columbia,Sc
Columbia, SC 29201
United States

Omrane Guedhami

University of South Carolina - Moore School of Business ( email )

Columbia, SC
United States

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