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Ex-ante and ex-post evaluation of zombie firms arising from the EAS program during the COVID-19 pandemic: A study of Japanese SMEs

Author

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  • Fukuda, Akira
  • Yamamoto, Isamu

Abstract

This study provides an ex-ante and ex-post evaluation of the Employment Adjustment Subsidy (EAS) that the Japanese government extended to unprecedented levels during the COVID-19 pandemic. Using unique monthly data from firm-level surveys, we investigate the types of firms that applied for the EAS and the evolution of their subsequent performance. A key contribution of our study is that we provide an ex-post evaluation of the EAS on firm performance for approximately two years during the pandemic. As in previous studies, we confirm that majority of the firms that applied for the EAS were not zombies before the pandemic. However, their subsequent sales were much lower than those of non-applicant firms, even during the economic recovery period. This feature was conspicuous in 2021, specifically for small-scale firms in troubled sectors, unless they received extra support. The results suggest that the initial large-scale subsidy was unsuccessful in preventing the zombification of troubled firms during the pandemic.

Suggested Citation

  • Fukuda, Akira & Yamamoto, Isamu, 2025. "Ex-ante and ex-post evaluation of zombie firms arising from the EAS program during the COVID-19 pandemic: A study of Japanese SMEs," Japan and the World Economy, Elsevier, vol. 74(C).
    • Handle: RePEc:eee:japwor:v:74:y:2025:i:c:s092214252500012x
    DOI: 10.1016/j.japwor.2025.101308
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    Cited by:

    1. Masayuki MORIKAWA, 2025. "Performance of Firms Using COVID-19-related Support Policies: Ex-post evaluation," Discussion papers 25107, Research Institute of Economy, Trade and Industry (RIETI).

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    Keywords

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    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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