Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/240331 
Year of Publication: 
2020
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 8/2020
Publisher: 
Bank of Finland, Helsinki
Abstract: 
We analyze the demographics of zombie firms and durations of zombie spells as well as their determinants, including an application on public subsidies using firm level population panel data from Finland. Firm-level analysis of firm demographics reveals that zombie-firms, as commonly defined in the literature, are often not truly distressed firms but rather companies with temporarily low revenues relative to interest payments. More importantly, we find that roughly a third of these firms are in fact growing companies and two thirds recover from the zombie status to become healthy firms. We also show that the increase of zombie firms over the past 15 years has mainly been driven by cyclical factors, as opposed to a secular trend. In our policy application on government subsidies to firms, estimation results strongly suggest that subsidy-receiving firms are less likely to die, regardless of the type of subsidy. However, with regard to recovery there is heterogeneity in the effects depending on the type of firm and the type of subsidy received. Thus, we do not find a robust positive association of subsidies with zombie recovery.
Subjects: 
Zombies
Misallocation
Firm exit
Firm growth
Subsidies
Productivity
JEL: 
D22
D24
G33
H25
L16
L25
O25
Persistent Identifier of the first edition: 
ISBN: 
978-952-323-328-7
Document Type: 
Working Paper

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