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How zombie firms affect healthy firms: The case of Portuguese trade sector

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  • da Silva, Armando
  • Gonçalves, Ana

Abstract

Zombie companies can be classified as being nonprofitable, having low productivity and being ten years old or over, these businesses continue to exist due to the support of banks and governments. This paper aims to understand the impact of these types of firms on the investment, employment growth and labour productivity of healthy companies from the wholesale and retail trade and the hospitality sector during the period 2011-2018. The data obtained indicate that the prevalence of zombie companies in Portugal (in the sectors under study) is higher in periods of economic crisis and that most of them are old and large companies, especially in the hotel industry sector. By using panel data models with fixed effects, our investigation concludes that zombie firms negatively affect how healthy companies are run, because they reduce the latter’s investment expenditure and workforce productivity.

Suggested Citation

  • da Silva, Armando & Gonçalves, Ana, 2022. "How zombie firms affect healthy firms: The case of Portuguese trade sector," Revista Galega de Economía, University of Santiago de Compostela. Faculty of Economics and Business., vol. 31(3), pages 1-18.
    • Handle: RePEc:sdo:regaec:v:31:y:2022:i:3_2
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    More about this item

    Keywords

    Zombie companies; Fixed effects model; Investment expenditure; Productivity;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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