Dawn of the (Half) Dead: The Twisted World of Zombie Identification

49 Pages Posted: 1 Nov 2022

See all articles by Luca Mingarelli

Luca Mingarelli

European Central Bank (ECB)

Beatrice Ravanetti

European Bank for Reconstruction and Development (EBRD)

Tamarah Shakir

European Central Bank (ECB)

Jonas Wendelborn

European Central Bank (ECB)

Date Written: October 1, 2022

Abstract

Since the term was first coined in studies on the 1990s Japanese crisis, the concept of zombification has been investigated and revived repeatedly when concerns arise about credit misallocation and stagnating productivity growth in an economy. The starting point for these studies nearly always involves trying to identify the so-called ‘zombie’ firms. This has led in the past years to a proliferation of different definitions and identification methodologies. We survey the most prominent definitions, discussing advantages and limitations of each. We also undertake a comparison of methodologies on a common dataset for euro area firms from 2004-2019, with the exercise revealing limited overlap and low comparability in the firms identified by several prominent studies. In response, we introduce a formalisation of zombie-classifications which helps to make order in the growing number of variations and identification methodologies. Moreover, this formalisation also helps extending the concept of binary identification to that of fuzzy zombie-identification. In particular, we introduce a general procedure to turn arbitrary binary classifications into fuzzy ones showing it successfully increases consistency between zombie definitions.

Keywords: vulnerable firms, zombie firms

JEL Classification: L25, D22, D24, C55, O40

Suggested Citation

Mingarelli, Luca and Ravanetti, Beatrice and Shakir, Tamarah and Wendelborn, Jonas, Dawn of the (Half) Dead: The Twisted World of Zombie Identification (October 1, 2022). ECB Working Paper No. 2022/2743, Available at SSRN: https://ssrn.com/abstract=4263233 or http://dx.doi.org/10.2139/ssrn.4263233

Luca Mingarelli (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Beatrice Ravanetti

European Bank for Reconstruction and Development (EBRD) ( email )

One Exchange Square
London, EC2A 2EH
United Kingdom

Tamarah Shakir

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Jonas Wendelborn

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
100
Abstract Views
345
Rank
470,388
PlumX Metrics