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Zombie firms in Canada

Author

Listed:
  • Alexander Amundsen
  • Amélie Lafrance-Cooke
  • Danny Leung

Abstract

The literature shows that zombie firms can lower aggregate productivity, impede reallocation and constrain the growth of healthy firms. In Canada and other advanced economies, the share of zombie firms has been rising over the past few decades, with recent studies showing that the share in Canada could potentially be the highest in the world. However, these studies of the Canadian context are based only on publicly traded Canadian firms. This paper presents new evidence on zombification using Canadian-controlled private corporations and publicly traded firms. The paper finds that the zombie share among all firms is considerably lower and diverging in trend. However, a number of notable results show that zombies are increasingly showing up in the mining, quarrying, and oil and gas extraction sector; they are accounting for more resources over time; their performance and productivity are worsening; they are negatively impacting the productivity and growth of healthy firms; and they are increasingly lowering aggregate productivity by a sizable margin.

Suggested Citation

  • Alexander Amundsen & Amélie Lafrance-Cooke & Danny Leung, 2023. "Zombie firms in Canada," Economic and Social Reports 202300300003e, Statistics Canada, Analytical Studies and Modelling Branch.
    • Handle: RePEc:stc:stcp8e:202300300003e
    DOI: https://doi.org/10.25318/36280001202300300003-eng
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    References listed on IDEAS

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    Cited by:

    1. Sean Clarke & Dave Krochmalnek, 2024. "Risks to Canada’s corporate sector as interest rates rise," Economic and Social Reports 202400100005e, Statistics Canada, Analytical Studies and Modelling Branch.

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    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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