Arbeitspapier
The life and death of zombies: Evidence from government subsidies to firms
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.
- ISBN
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978-952-323-328-7
- Language
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Englisch
- Bibliographic citation
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Series: Bank of Finland Research Discussion Papers ; No. 8/2020
- Classification
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Wirtschaft
Firm Behavior: Empirical Analysis
Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
Bankruptcy; Liquidation
Business Taxes and Subsidies including sales and value-added (VAT)
Industrial Organization and Macroeconomics: Industrial Structure and Structural Change; Industrial Price Indices
Firm Performance: Size, Diversification, and Scope
Industrial Policy
- Subject
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Zombies
Misallocation
Firm exit
Firm growth
Subsidies
Productivity
- Event
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Geistige Schöpfung
- (who)
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Nurmi, Satu
Vanhala, Juuso
Virén, Matti E. E.
- Event
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Veröffentlichung
- (who)
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Bank of Finland
- (where)
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Helsinki
- (when)
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2020
- Handle
- Last update
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10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Nurmi, Satu
- Vanhala, Juuso
- Virén, Matti E. E.
- Bank of Finland
Time of origin
- 2020
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Model-based regulation and firms' access to finance
Default risk on Finnish government foreign currency debt
Banks' equity stakes in borrowing firms: A corporate finance approach
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The effect of lenders' credit risk transfer activities on borrowing firms' equity returns
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Accountability of the ECB and a government's incentives to rebel against the common monetary policy in EMU
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